It's Down 30% But Hansa Biopharma AB (publ) (STO:HNSA) Could Be Riskier Than It Looks

Hansa Biopharma AB (publ) (STO:HNSA) shareholders won't be pleased to see that the share price has had a very rough month, dropping 30% and undoing the prior period's positive performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 26%, which is great even in a bull market.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Hansa Biopharma's P/S ratio of 11.6x, since the median price-to-sales (or "P/S") ratio for the Biotechs industry in Sweden is also close to 12.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Hansa Biopharma

What Does Hansa Biopharma's Recent Performance Look Like?

Hansa Biopharma certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Hansa Biopharma's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Hansa Biopharma's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 65%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 69% per annum as estimated by the four analysts watching the company. With the industry only predicted to deliver 60% each year, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Hansa Biopharma is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Hansa Biopharma's plummeting stock price has brought its P/S back to a similar region as 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.

We've established that Hansa Biopharma currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you settle on your opinion, we've discovered 5 warning signs for Hansa Biopharma (1 is potentially serious!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.