It's Down 26% But Sunshine Biopharma, Inc. (NASDAQ:SBFM) Could Be Riskier Than It Looks
To the annoyance of some shareholders, Sunshine Biopharma, Inc. (NASDAQ:SBFM) shares are down a considerable 26% 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 64% loss during that time.
Since its price has dipped substantially, Sunshine Biopharma may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.3x and even P/S higher than 47x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
Check out our latest analysis for Sunshine Biopharma
How Has Sunshine Biopharma Performed Recently?
Recent times have been advantageous for Sunshine Biopharma as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Sunshine Biopharma.
How Is Sunshine Biopharma's Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as depressed as Sunshine Biopharma's is when the company's growth is on track to lag the industry decidedly.
Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.
Turning to the outlook, the next year should generate growth of 137% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 116%, which is noticeably less attractive.
With this information, we find it odd that Sunshine Biopharma is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Final Word
Shares in Sunshine Biopharma have plummeted and its P/S has followed suit. 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.
To us, it seems Sunshine Biopharma 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. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.
Before you settle on your opinion, we've discovered 2 warning signs for Sunshine Biopharma (1 doesn't sit too well with us!) that you should be aware of.
If you're unsure about the strength of Sunshine Biopharma's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
