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Harvard Bioscience, Inc. (NASDAQ:HBIO) Soars 39% But It's A Story Of Risk Vs Reward

Harvard Bioscience, Inc. (NASDAQ:HBIO) shares have continued their recent momentum with a 39% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 73% in the last year.

Although its price has surged higher, Harvard Bioscience's price-to-sales (or "P/S") ratio of 2.2x might still make it look like a buy right now compared to the Life Sciences industry in the United States, where around half of the companies have P/S ratios above 4.3x and even P/S above 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Harvard Bioscience

ps-multiple-vs-industry
ps-multiple-vs-industry

How Has Harvard Bioscience Performed Recently?

Harvard Bioscience could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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If you'd like to see what analysts are forecasting going forward, you should check out our free report on Harvard Bioscience.

How Is Harvard Bioscience's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Harvard Bioscience's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.1%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 7.4% as estimated by the two analysts watching the company. With the industry only predicted to deliver 4.0%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Harvard Bioscience's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Harvard Bioscience's P/S

Despite Harvard Bioscience's share price climbing recently, its P/S still lags most other companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To us, it seems Harvard Bioscience currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 1 warning sign for Harvard Bioscience that you need to take into consideration.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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