After Leaping 32% LigaChem Biosciences Inc. (KOSDAQ:141080) Shares Are Not Flying Under The Radar

LigaChem Biosciences Inc. (KOSDAQ:141080) shares have had a really impressive month, gaining 32% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 46%.

Following the firm bounce in price, LigaChem Biosciences may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 43.1x, when you consider almost half of the companies in the Life Sciences industry in Korea have P/S ratios under 3.5x and even P/S lower than 1x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for LigaChem Biosciences

How LigaChem Biosciences Has Been Performing

Recent times have been advantageous for LigaChem Biosciences as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For LigaChem Biosciences?

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

Retrospectively, the last year delivered an exceptional 95% gain to the company's top line. Pleasingly, revenue has also lifted 273% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 36% over the next year. With the industry only predicted to deliver 19%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that LigaChem Biosciences' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From LigaChem Biosciences' P/S?

The strong share price surge has lead to LigaChem Biosciences' P/S soaring as well. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into LigaChem Biosciences shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with LigaChem Biosciences, and understanding them should be part of your investment process.

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.