Kindstar Globalgene Technology, Inc. (HKG:9960) shareholders are no doubt pleased to see that the share price has bounced 29% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.
In spite of the firm bounce in price, it's still not a stretch to say that Kindstar Globalgene Technology's price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" compared to the Healthcare industry in Hong Kong, where the median P/S ratio is around 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Kindstar Globalgene Technology
How Has Kindstar Globalgene Technology Performed Recently?
While the industry has experienced revenue growth lately, Kindstar Globalgene Technology's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
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In order to justify its P/S ratio, Kindstar Globalgene Technology would need to produce growth that's similar to the industry.
Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 5.3% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.
Turning to the outlook, the next year should generate growth of 55% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.
With this in consideration, we find it intriguing that Kindstar Globalgene Technology's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.
What Does Kindstar Globalgene Technology's P/S Mean For Investors?
Its shares have lifted substantially and now Kindstar Globalgene Technology's P/S is back within range of the industry median. 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 enticing revenue growth figures that outpace the industry, Kindstar Globalgene Technology's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.
Having said that, be aware Kindstar Globalgene Technology is showing 2 warning signs in our investment analysis, and 1 of those is significant.
If these risks are making you reconsider your opinion on Kindstar Globalgene Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.