Slammed 29% LabGenomics Co., Ltd. (KOSDAQ:084650) Screens Well Here But There Might Be A Catch

LabGenomics Co., Ltd. (KOSDAQ:084650) shares have retraced a considerable 29% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 36% in that time.

After such a large drop in price, LabGenomics may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.7x, since almost half of all companies in the Biotechs industry in Korea have P/S ratios greater than 8.7x and even P/S higher than 44x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for LabGenomics

What Does LabGenomics' Recent Performance Look Like?

Recent times haven't been great for LabGenomics as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For LabGenomics?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like LabGenomics' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 17%. Still, revenue has fallen 42% in total from three years ago, which is quite disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 51% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 41%, which is noticeably less attractive.

In light of this, it's peculiar that LabGenomics' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does LabGenomics' P/S Mean For Investors?

LabGenomics' P/S looks about as weak as its stock price lately. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To us, it seems LabGenomics currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 2 warning signs for LabGenomics that we have uncovered.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.