The CANbridge Pharmaceuticals Inc. (HKG:1228) share price has fared very poorly over the last month, falling by a substantial 26%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 75% loss during that time.

Following the heavy fall in price, CANbridge Pharmaceuticals may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.3x, considering almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 11.7x and even P/S higher than 27x 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 so limited.

What Does CANbridge Pharmaceuticals' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, CANbridge Pharmaceuticals has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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.

Is There Any Revenue Growth Forecasted For CANbridge Pharmaceuticals?

CANbridge Pharmaceuticals' 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, we see that the company grew revenue by an impressive 30% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 43% each year during the coming three years according to the two analysts following the company. With the industry predicted to deliver 56% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why CANbridge Pharmaceuticals' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Having almost fallen off a cliff, CANbridge Pharmaceuticals' share price has pulled its P/S way down as well. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of CANbridge Pharmaceuticals' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 4 warning signs for CANbridge Pharmaceuticals (2 are a bit concerning!) that you should be aware of.

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).

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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.