Seegene, Inc. (KOSDAQ:096530) Stock Catapults 27% Though Its Price And Business Still Lag The Industry

Seegene, Inc. (KOSDAQ:096530) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

Although its price has surged higher, Seegene's price-to-sales (or "P/S") ratio of 3.1x 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 11.1x and even P/S above 46x 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 Seegene

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

With revenue growth that's inferior to most other companies of late, Seegene has been relatively sluggish. 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 Seegene.

How Is Seegene's Revenue Growth Trending?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 72% overall from three years ago. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 13% as estimated by the sole analyst watching the company. That's shaping up to be materially lower than the 47% growth forecast for the broader industry.

In light of this, it's understandable that Seegene's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Shares in Seegene have risen appreciably however, its P/S is still subdued. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As expected, our analysis of Seegene's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 2 warning signs for Seegene that you should be aware of.

If you're unsure about the strength of Seegene's 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.