Investors Holding Back On EuBiologics Co., Ltd. (KOSDAQ:206650)

With a price-to-sales (or "P/S") ratio of 6.1x EuBiologics Co., Ltd. (KOSDAQ:206650) may be sending bullish signals at the moment, given that almost half of all the Biotechs companies in Korea have P/S ratios greater than 10.4x and even P/S higher than 51x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for EuBiologics

How EuBiologics Has Been Performing

With revenue growth that's inferior to most other companies of late, EuBiologics 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.

Want the full picture on analyst estimates for the company? Then our free report on EuBiologics will help you uncover what's on the horizon.

How Is EuBiologics' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. Pleasingly, revenue has also lifted 143% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 67% over the next year. With the industry only predicted to deliver 34%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that EuBiologics' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On EuBiologics' P/S

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.

EuBiologics' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for EuBiologics that you should be aware of.

If these risks are making you reconsider your opinion on EuBiologics, 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.