The Market Doesn't Like What It Sees From Amicogen, Inc.'s (KOSDAQ:092040) Revenues Yet

With a price-to-sales (or "P/S") ratio of 1.8x Amicogen, Inc. (KOSDAQ:092040) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in Korea have P/S ratios greater than 15x and even P/S higher than 60x 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.

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See our latest analysis for Amicogen

What Does Amicogen's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Amicogen over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on Amicogen will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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 Amicogen's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 5.7% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 69% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that Amicogen's P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Amicogen's P/S Mean For Investors?

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 Amicogen revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Amicogen is showing 1 warning sign in our investment analysis, you should know about.

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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.