Revenues Not Telling The Story For HLB Therapeutics Co.,Ltd. (KOSDAQ:115450) After Shares Rise 26%

The HLB Therapeutics Co.,Ltd. (KOSDAQ:115450) share price has done very well over the last month, posting an excellent gain of 26%. Looking back a bit further, it's encouraging to see the stock is up 42% in the last year.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about HLB TherapeuticsLtd's P/S ratio of 14x, since the median price-to-sales (or "P/S") ratio for the Biotechs industry in Korea is also close to 12.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for HLB TherapeuticsLtd

How Has HLB TherapeuticsLtd Performed Recently?

We'd have to say that with no tangible growth over the last year, HLB TherapeuticsLtd's revenue has been unimpressive. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on HLB TherapeuticsLtd will help you shine a light on its historical performance.

How Is HLB TherapeuticsLtd's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like HLB TherapeuticsLtd's to be considered reasonable.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Regardless, revenue has managed to lift by a handy 21% in aggregate from three years ago, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 60% shows it's noticeably less attractive.

In light of this, it's curious that HLB TherapeuticsLtd's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Final Word

HLB TherapeuticsLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that HLB TherapeuticsLtd's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

You should always think about risks. Case in point, we've spotted 1 warning sign for HLB TherapeuticsLtd you should be aware of.

If you're unsure about the strength of HLB TherapeuticsLtd'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.