Biofrontera Inc.'s (NASDAQ:BFRI) Shares Leap 25% Yet They're Still Not Telling The Full Story

Biofrontera Inc. (NASDAQ:BFRI) shares have continued their recent momentum with a 25% gain in the last month alone. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 85% share price drop in the last twelve months.

Even after such a large jump in price, Biofrontera's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a strong buy right now compared to the wider Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios above 2.9x and even P/S above 11x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Biofrontera

What Does Biofrontera's Recent Performance Look Like?

Biofrontera's revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. Those who are bullish on Biofrontera will be hoping that this isn't the case.

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

Is There Any Revenue Growth Forecasted For Biofrontera?

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

If we review the last year of revenue growth, the company posted a terrific increase of 21%. Pleasingly, revenue has also lifted 57% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 24% per year during the coming three years according to the dual analysts following the company. That's shaping up to be materially higher than the 17% each year growth forecast for the broader industry.

In light of this, it's peculiar that Biofrontera's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Biofrontera's P/S Mean For Investors?

Shares in Biofrontera have risen appreciably however, its P/S is still subdued. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Biofrontera's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 4 warning signs for Biofrontera you should be aware of, and 3 of them shouldn't be ignored.

If you're unsure about the strength of Biofrontera'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.