CANbridge Pharmaceuticals Inc. (HKG:1228) Stock Catapults 28% Though Its Price And Business Still Lag The Industry

Simply Wall St · 04/15 22:28

Despite an already strong run, CANbridge Pharmaceuticals Inc. (HKG:1228) shares have been powering on, with a gain of 28% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 44% over that time.

Although its price has surged higher, CANbridge Pharmaceuticals may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Biotechs industry in Hong Kong have P/S ratios greater than 8.9x and even P/S higher than 28x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

We've discovered 3 warning signs about CANbridge Pharmaceuticals. View them for free.

Check out our latest analysis for CANbridge Pharmaceuticals

ps-multiple-vs-industry
SEHK:1228 Price to Sales Ratio vs Industry April 15th 2025

How Has CANbridge Pharmaceuticals Performed Recently?

For example, consider that CANbridge Pharmaceuticals' financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for CANbridge Pharmaceuticals, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For CANbridge Pharmaceuticals?

In order to justify its P/S ratio, CANbridge Pharmaceuticals would need to produce anemic growth that's substantially trailing 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 17%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 173% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that to the industry, which is predicted to deliver 58% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that CANbridge Pharmaceuticals' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From CANbridge Pharmaceuticals' P/S?

Even after such a strong price move, CANbridge Pharmaceuticals' P/S still trails the rest of the industry. 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, CANbridge Pharmaceuticals 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. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with CANbridge Pharmaceuticals, and understanding them should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.