Despite an already strong run, Uni-Bio Science Group Limited (HKG:690) shares have been powering on, with a gain of 28% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 48% in the last year.
Although its price has surged higher, Uni-Bio Science Group may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.2x, considering almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 10.9x and even P/S higher than 26x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for Uni-Bio Science Group
How Uni-Bio Science Group Has Been Performing
Revenue has risen firmly for Uni-Bio Science Group recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Uni-Bio Science Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.
Do Revenue Forecasts Match The Low P/S Ratio?
Uni-Bio Science Group'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.
Retrospectively, the last year delivered an exceptional 26% gain to the company's top line. The latest three year period has also seen an excellent 175% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 78% shows it's noticeably less attractive.
In light of this, it's understandable that Uni-Bio Science Group's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.
The Bottom Line On Uni-Bio Science Group's P/S
Shares in Uni-Bio Science Group have risen appreciably however, its P/S is still subdued. 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.
In line with expectations, Uni-Bio Science Group maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Having said that, be aware Uni-Bio Science Group is showing 3 warning signs in our investment analysis, and 1 of those is significant.
If you're unsure about the strength of Uni-Bio Science Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
