There's No Escaping Dx & Vx Co., Ltd.'s (KOSDAQ:180400) Muted Revenues Despite A 28% Share Price Rise

Explore Dx & Vx's Fair Values from the Community and select yours

Dx & Vx Co., Ltd. (KOSDAQ:180400) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 15% in the last twelve months.

In spite of the firm bounce in price, Dx & Vx may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 4.2x, since almost half of all companies in the Biotechs industry in Korea have P/S ratios greater than 15.2x and even P/S higher than 46x 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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View our latest analysis for Dx & Vx

How Dx & Vx Has Been Performing

For instance, Dx & Vx's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Dx & Vx 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 Dx & Vx's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Dx & Vx?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Dx & Vx's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 27% decrease to the company's top line. Even so, admirably revenue has lifted 172% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 52% shows it's noticeably less attractive.

With this information, we can see why Dx & Vx is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Dx & Vx's P/S Mean For Investors?

Even after such a strong price move, Dx & Vx's P/S still trails the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Dx & Vx confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of 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.

Having said that, be aware Dx & Vx is showing 5 warning signs in our investment analysis, and 4 of those shouldn't be ignored.

If these risks are making you reconsider your opinion on Dx & Vx, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.