What You Can Learn From Prenetics Global Limited's (NASDAQ:PRE) P/S After Its 27% Share Price Crash

To the annoyance of some shareholders, Prenetics Global Limited (NASDAQ:PRE) shares are down a considerable 27% in the last month, which continues a horrid run for the company. The last month has meant the stock is now only up 8.1% during the last year.

In spite of the heavy fall in price, you could still be forgiven for thinking Prenetics Global is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.8x, considering almost half the companies in the United States' Healthcare industry have P/S ratios below 1.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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See our latest analysis for Prenetics Global

How Prenetics Global Has Been Performing

Prenetics Global could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. 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 Prenetics Global will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

Retrospectively, the last year delivered a frustrating 91% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 89% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 164% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 10%, which is noticeably less attractive.

With this information, we can see why Prenetics Global is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Prenetics Global's P/S remain high even after its stock plunged. 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 Prenetics Global's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Prenetics Global that you need to be mindful of.

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