Blueprint Medicines Corporation's (NASDAQ:BPMC) Shares May Have Run Too Fast Too Soon
Blueprint Medicines Corporation's (NASDAQ:BPMC) price-to-sales (or "P/S") ratio of 14.4x might make it look like a sell right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios below 11.6x and even P/S below 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.
View our latest analysis for Blueprint Medicines
What Does Blueprint Medicines' P/S Mean For Shareholders?
Recent times haven't been great for Blueprint Medicines as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.
Keen to find out how analysts think Blueprint Medicines' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Enough Revenue Growth Forecasted For Blueprint Medicines?
There's an inherent assumption that a company should outperform the industry for P/S ratios like Blueprint Medicines' to be considered reasonable.
If we review the last year of revenue growth, the company posted a worthy increase of 13%. This was backed up an excellent period prior to see revenue up by 207% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.
Looking ahead now, revenue is anticipated to climb by 38% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 97% per annum growth forecast for the broader industry.
With this in consideration, we believe it doesn't make sense that Blueprint Medicines' P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.
What Does Blueprint Medicines' P/S Mean For Investors?
It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
Despite analysts forecasting some poorer-than-industry revenue growth figures for Blueprint Medicines, this doesn't appear to be impacting the P/S in the slightest. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.
Before you settle on your opinion, we've discovered 2 warning signs for Blueprint Medicines that you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
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