Market Might Still Lack Some Conviction On LabGenomics Co., Ltd. (KOSDAQ:084650) Even After 35% Share Price Boost

LabGenomics Co., Ltd. (KOSDAQ:084650) shares have had a really impressive month, gaining 35% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

Although its price has surged higher, LabGenomics' price-to-sales (or "P/S") ratio of 2.9x might still make it look like a strong buy right now compared to the wider Biotechs industry in Korea, where around half of the companies have P/S ratios above 8.2x and even P/S above 44x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for LabGenomics

What Does LabGenomics' P/S Mean For Shareholders?

LabGenomics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on LabGenomics.

How Is LabGenomics' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as LabGenomics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 1.8% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 45% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 53% during the coming year according to the sole analyst following the company. With the industry only predicted to deliver 32%, the company is positioned for a stronger revenue result.

With this information, we find it odd that LabGenomics is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From LabGenomics' P/S?

Shares in LabGenomics have risen appreciably however, its P/S is still subdued. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at LabGenomics' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You need to take note of risks, for example - LabGenomics has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

If you're unsure about the strength of LabGenomics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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