When close to half the companies in the Biotechs industry in China have price-to-sales ratios (or "P/S") below 6.8x, you may consider Gan & Lee Pharmaceuticals. (SHSE:603087) as a stock to avoid entirely with its 11.3x 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.
SHSE:603087 Price to Sales Ratio vs Industry June 6th 2024
What Does Gan & Lee Pharmaceuticals' P/S Mean For Shareholders?
Gan & Lee Pharmaceuticals certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Gan & Lee Pharmaceuticals.
Do Revenue Forecasts Match The High P/S Ratio?
Gan & Lee Pharmaceuticals' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
Taking a look back first, we see that the company grew revenue by an impressive 65% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 24% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Turning to the outlook, the next year should generate growth of 49% as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 270% growth forecast for the broader industry.
In light of this, it's alarming that Gan & Lee Pharmaceuticals' P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.
The Key Takeaway
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
It comes as a surprise to see Gan & Lee Pharmaceuticals trade at such a high P/S given the revenue forecasts look less than stellar. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.
Before you settle on your opinion, we've discovered 1 warning sign for Gan & Lee Pharmaceuticals that you should be aware of.
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.
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.
當中國生物技術行業將近一半的公司的市銷比(或 “市銷率”)低於6.8倍時,你可以考慮Gan & Lee Pharmicals。(上海證券交易所股票代碼:603087)作爲一隻值得完全避開的股票,其市銷率爲11.3倍。但是,我們需要更深入地挖掘,以確定市銷售率大幅上升是否有合理的依據。
SHSE: 603087 與行業的市銷比率 2024 年 6 月 6 日
Gan & Lee Pharmicals的市銷率對股東意味着什麼?
Gan & Lee Pharmicals最近確實做得很好,因爲它的收入增長幅度超過了大多數其他公司。看來市場預計這種形式將持續到未來,因此市銷售率會升高。你真的希望如此,否則你會無緣無故地付出相當大的代價。
如果你想了解分析師對未來的預測,你應該查看我們關於Gan & Lee Pharmicals的免費報告。
收入預測與高市銷率相匹配嗎?
Gan & Lee Pharmaceuticals的市銷率對於一家預計將實現非常強勁的增長且重要的是表現要好於行業的公司來說是典型的。