Hansa Biopharma AB (publ) (STO:HNSA) Not Lagging Industry On Growth Or Pricing

You may think that with a price-to-sales (or "P/S") ratio of 12.4x Hansa Biopharma AB (publ) (STO:HNSA) is a stock to avoid completely, seeing as almost half of all the Biotechs companies in Sweden have P/S ratios under 8.1x and even P/S lower than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Hansa Biopharma

What Does Hansa Biopharma's Recent Performance Look Like?

Hansa Biopharma hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

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

How Is Hansa Biopharma's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 18%. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Looking ahead now, revenue is anticipated to climb by 134% per year during the coming three years according to the six analysts following the company. With the industry only predicted to deliver 27% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Hansa Biopharma's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Hansa Biopharma's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Hansa Biopharma maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Biotechs industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Hansa Biopharma that you should be aware of.

If you're unsure about the strength of Hansa Biopharma'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.