Yahoo Finance Take Care Before Jumping Onto Khiron Life Sciences Corp. (CVE:KHRN) Even Though It's 47% Cheaper
To the annoyance of some shareholders, Khiron Life Sciences Corp. (CVE:KHRN) shares are down a considerable 47% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 84% loss during that time.
Even after such a large drop in price, there still wouldn't be many who think Khiron Life Sciences' price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Canada's Pharmaceuticals industry is similar at about 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Khiron Life Sciences
What Does Khiron Life Sciences' Recent Performance Look Like?
With revenue growth that's inferior to most other companies of late, Khiron Life Sciences has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying to much for the stock.
Keen to find out how analysts think Khiron Life Sciences' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Some Revenue Growth Forecasted For Khiron Life Sciences?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Khiron Life Sciences' to be considered reasonable.
Retrospectively, the last year delivered an exceptional 38% gain to the company's top line. Pleasingly, revenue has also lifted 103% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.
Turning to the outlook, the next year should generate growth of 69% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 11%, the company is positioned for a stronger revenue result.
In light of this, it's curious that Khiron Life Sciences' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.
What We Can Learn From Khiron Life Sciences' P/S?
Following Khiron Life Sciences' share price tumble, its P/S is just clinging on to the industry median P/S. 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, Khiron Life Sciences' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
You need to take note of risks, for example - Khiron Life Sciences has 5 warning signs (and 3 which are concerning) we think you should know about.
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.
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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.
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