Biofrontera Inc. (NASDAQ:BFRI) Not Doing Enough For Some Investors As Its Shares Slump 28%

Biofrontera Inc. +1.20%

Biofrontera Inc.

BFRI

1.69

+1.20%

Unfortunately for some shareholders, the Biofrontera Inc. (NASDAQ:BFRI) share price has dived 28% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 85% share price decline.

After such a large drop in price, Biofrontera's price-to-sales (or "P/S") ratio of 0.1x might make it look like a strong buy right now compared to the wider Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios above 3.2x and even P/S above 20x are quite common. 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 Biofrontera

ps-multiple-vs-industry
NasdaqCM:BFRI Price to Sales Ratio vs Industry December 30th 2023

How Has Biofrontera Performed Recently?

With revenue growth that's inferior to most other companies of late, Biofrontera has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Biofrontera will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Biofrontera's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 21% last year. Pleasingly, revenue has also lifted 78% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 29% each year during the coming three years according to the dual analysts following the company. With the industry predicted to deliver 57% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Biofrontera's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Biofrontera's P/S

Biofrontera's P/S looks about as weak as its stock price lately. 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.

As we suspected, our examination of Biofrontera's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Biofrontera (of which 2 are significant!) you should know about.

If you're unsure about the strength of Biofrontera'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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