There's No Escaping Eone Diagnomics Genome Center Co., Ltd.'s (KOSDAQ:245620) Muted Revenues Despite A 43% Share Price Rise

The Eone Diagnomics Genome Center Co., Ltd. (KOSDAQ:245620) share price has done very well over the last month, posting an excellent gain of 43%. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 56% share price drop in the last twelve months.

Even after such a large jump in price, Eone Diagnomics Genome Center's price-to-sales (or "P/S") ratio of 0.8x might still make it look like a strong buy right now compared to the wider Life Sciences industry in Korea, where around half of the companies have P/S ratios above 4.1x and even P/S above 9x 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.

See our latest analysis for Eone Diagnomics Genome Center

How Eone Diagnomics Genome Center Has Been Performing

The revenue growth achieved at Eone Diagnomics Genome Center over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Eone Diagnomics Genome Center 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 Eone Diagnomics Genome Center's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 9.3% last year. The solid recent performance means it was also able to grow revenue by 24% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 21% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why Eone Diagnomics Genome Center's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Eone Diagnomics Genome Center's recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

As we suspected, our examination of Eone Diagnomics Genome Center revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Eone Diagnomics Genome Center (2 are potentially serious!) that you should be aware of before investing here.

If you're unsure about the strength of Eone Diagnomics Genome Center'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.