There's No Escaping ImmuCell Corporation's (NASDAQ:ICCC) Muted Revenues
With a price-to-sales (or "P/S") ratio of 2.2x ImmuCell Corporation (NASDAQ:ICCC) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 12.8x and even P/S higher than 59x 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.
Check out our latest analysis for ImmuCell
What Does ImmuCell's P/S Mean For Shareholders?
As an illustration, revenue has deteriorated at ImmuCell over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. If you 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.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on ImmuCell will help you shine a light on its historical performance.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, ImmuCell would need to produce anemic growth that's substantially trailing the industry.
Retrospectively, the last year delivered a frustrating 24% 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 13% 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.
Comparing that to the industry, which is predicted to deliver 59% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.
With this information, we can see why ImmuCell is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.
The Final Word
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
In line with expectations, ImmuCell maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.
Before you settle on your opinion, we've discovered 2 warning signs for ImmuCell (1 is potentially serious!) that you should be aware of.
If you're unsure about the strength of ImmuCell's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
