ISU Abxis Co., Ltd. (KOSDAQ:086890) Held Back By Insufficient Growth Even After Shares Climb 26%

ISU Abxis Co., Ltd. (KOSDAQ:086890) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Although its price has surged higher, ISU Abxis may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 3.6x, considering almost half of all companies in the Biotechs industry in Korea have P/S ratios greater than 10.2x and even P/S higher than 43x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for ISU Abxis

How ISU Abxis Has Been Performing

ISU Abxis has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on ISU Abxis' earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For ISU Abxis?

In order to justify its P/S ratio, ISU Abxis would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 20%. Pleasingly, revenue has also lifted 91% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 51% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why ISU Abxis' P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On ISU Abxis' P/S

Even after such a strong price move, ISU Abxis' P/S still trails the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of ISU Abxis revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for ISU Abxis with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.