Biosino Bio-Technology and Science Incorporation's (HKG:8247) Share Price Boosted 60% But Its Business Prospects Need A Lift Too

Despite an already strong run, Biosino Bio-Technology and Science Incorporation (HKG:8247) shares have been powering on, with a gain of 60% in the last thirty days. The last month tops off a massive increase of 169% in the last year.

Although its price has surged higher, Biosino Bio-Technology and Science Incorporation may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.2x, since almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 13.1x and even P/S higher than 71x are not unusual. 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.

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Check out our latest analysis for Biosino Bio-Technology and Science Incorporation

How Has Biosino Bio-Technology and Science Incorporation Performed Recently?

For instance, Biosino Bio-Technology and Science Incorporation's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Biosino Bio-Technology and Science Incorporation will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Biosino Bio-Technology and Science Incorporation will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Biosino Bio-Technology and Science Incorporation's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 21%. This means it has also seen a slide in revenue over the longer-term as revenue is down 35% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 616% shows it's an unpleasant look.

In light of this, it's understandable that Biosino Bio-Technology and Science Incorporation's P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Biosino Bio-Technology and Science Incorporation's P/S Mean For Investors?

Even after such a strong price move, Biosino Bio-Technology and Science Incorporation's P/S still trails the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Biosino Bio-Technology and Science Incorporation maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Biosino Bio-Technology and Science Incorporation (1 is concerning) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.