BeiGene, Ltd. (NASDAQ:ONC) Stock Catapults 26% Though Its Price And Business Still Lag The Industry

BeiGene, Ltd. (NASDAQ:ONC) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 54%.

Although its price has surged higher, BeiGene may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 7.5x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.1x and even P/S higher than 60x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for BeiGene

What Does BeiGene's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, BeiGene has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 BeiGene will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For BeiGene?

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

Taking a look back first, we see that the company grew revenue by an impressive 50% last year. The latest three year period has also seen an excellent 243% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 27% each year as estimated by the analysts watching the company. With the industry predicted to deliver 143% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that BeiGene's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

The latest share price surge wasn't enough to lift BeiGene's P/S close to the industry median. 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.

We've established that BeiGene maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for BeiGene with six simple checks.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.