With BioHarvest Sciences Inc. (NASDAQ:BHST) It Looks Like You'll Get What You Pay For

BioHarvest Sciences Inc.'s (NASDAQ:BHST) price-to-sales (or "P/S") ratio of 5.1x may look like a poor investment opportunity when you consider close to half the companies in the Personal Products industry in the United States have P/S ratios below 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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View our latest analysis for BioHarvest Sciences

What Does BioHarvest Sciences' Recent Performance Look Like?

BioHarvest Sciences certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For BioHarvest Sciences?

In order to justify its P/S ratio, BioHarvest Sciences would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 58% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 47% per year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 5.7% per annum, which is noticeably less attractive.

With this information, we can see why BioHarvest Sciences 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

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.

We've established that BioHarvest Sciences maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Personal Products industry, as expected. 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 BioHarvest Sciences that you need to be mindful of.

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