Harvard Bioscience, Inc.'s (NASDAQ:HBIO) Shares Not Telling The Full Story

You may think that with a price-to-sales (or "P/S") ratio of 1.3x Harvard Bioscience, Inc. (NASDAQ:HBIO) is definitely a stock worth checking out, seeing as almost half of all the Life Sciences companies in the United States have P/S ratios greater than 3.3x and even P/S above 6x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Harvard Bioscience

What Does Harvard Bioscience's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Harvard Bioscience has been very sluggish. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. You'd much rather the company improve its revenue performance if you still believe in the business. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

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

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

Harvard Bioscience's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

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 6.8%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 7.6% as estimated by the dual analysts watching the company. With the industry only predicted to deliver 3.9%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Harvard Bioscience's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

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.

Harvard Bioscience'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. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Harvard Bioscience that you should be aware of.

If these risks are making you reconsider your opinion on Harvard Bioscience, 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.

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