Adaptimmune Therapeutics plc (NASDAQ:ADAP) Looks Inexpensive But Perhaps Not Attractive Enough
With a price-to-sales (or "P/S") ratio of 8.5x Adaptimmune Therapeutics plc (NASDAQ:ADAP) may be sending bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 11.8x and even P/S higher than 53x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
Check out our latest analysis for Adaptimmune Therapeutics
What Does Adaptimmune Therapeutics' P/S Mean For Shareholders?
Recent times have been advantageous for Adaptimmune Therapeutics as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 analyst estimates for the company? Then our free report on Adaptimmune Therapeutics will help you uncover what's on the horizon.
How Is Adaptimmune Therapeutics' Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as low as Adaptimmune Therapeutics' is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered an explosive gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.
Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 18% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 95% per annum, which is noticeably more attractive.
With this in consideration, its clear as to why Adaptimmune Therapeutics' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
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.
We've established that Adaptimmune Therapeutics maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.
You need to take note of risks, for example - Adaptimmune Therapeutics has 4 warning signs (and 1 which is concerning) we think you should know about.
If these risks are making you reconsider your opinion on Adaptimmune Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.
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
