When you see that almost half of the companies in the Biotechs industry in China have price-to-sales ratios (or "P/S") below 8.4x, Gan & Lee Pharmaceuticals. (SHSE:603087) looks to be giving off strong sell signals with its 13.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
Check out our latest analysis for Gan & Lee Pharmaceuticals
What Does Gan & Lee Pharmaceuticals' P/S Mean For Shareholders?
With revenue growth that's inferior to most other companies of late, Gan & Lee Pharmaceuticals has been relatively sluggish. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on analyst estimates for the company? Then our free report on Gan & Lee Pharmaceuticals will help you uncover what's on the horizon.
How Is Gan & Lee Pharmaceuticals' Revenue Growth Trending?
In order to justify its P/S ratio, Gan & Lee Pharmaceuticals would need to produce outstanding growth that's well in excess of the industry.
If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 26% drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Turning to the outlook, the next year should generate growth of 28% as estimated by the only analyst watching the company. That's shaping up to be materially lower than the 908% growth forecast for the broader industry.
With this in consideration, we believe it doesn't make sense that Gan & Lee Pharmaceuticals' P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.
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.
Despite analysts forecasting some poorer-than-industry revenue growth figures for Gan & Lee Pharmaceuticals, this doesn't appear to be impacting the P/S in the slightest. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. At these price levels, investors should remain cautious, particularly if things don't improve.
And what about other risks? Every company has them, and we've spotted 3 warning signs for Gan & Lee Pharmaceuticals (of which 2 make us uncomfortable!) you should know about.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
当你看到中国生物技术行业将近一半的公司的市销比(或 “P/S”)低于8.4倍时,Gan & Lee Pharmicals。(上海证券交易所股票代码:603087)的市盈率为13.1倍,似乎正在发出强劲的卖出信号。尽管如此,我们需要更深入地挖掘,以确定市盈率大幅上升是否有合理的基础。
查看我们对 Gan & Lee Pharmicals 的最新分析
甘李制药的市盈率对股东意味着什么?
由于最近的收入增长不及大多数其他公司,Gan & Lee Pharmicals一直相对疲软。一种可能性是市盈率很高,因为投资者认为这种乏善可陈的收入表现将显著改善。但是,如果不是这样,投资者可能会陷入为股票支付过多费用的困境。