Curis, Inc. (NASDAQ:CRIS) Surges 54% Yet Its Low P/S Is No Reason For Excitement
Curis, Inc. (NASDAQ:CRIS) shareholders would be excited to see that the share price has had a great month, posting a 54% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 11% is also fairly reasonable.
Although its price has surged higher, Curis may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 6.5x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.6x and even P/S higher than 49x 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 Curis
How Curis Has Been Performing
While the industry has experienced revenue growth lately, Curis' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
Want the full picture on analyst estimates for the company? Then our free report on Curis will help you uncover what's on the horizon.
Is There Any Revenue Growth Forecasted For Curis?
The only time you'd be truly comfortable seeing a P/S as low as Curis' is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered a frustrating 1.9% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 8.0% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 4.9% each year during the coming three years according to the five analysts following the company. That's shaping up to be materially lower than the 221% per annum growth forecast for the broader industry.
With this information, we can see why Curis is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
What We Can Learn From Curis' P/S?
The latest share price surge wasn't enough to lift Curis' P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
As we suspected, our examination of Curis' 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.
Before you take the next step, you should know about the 5 warning signs for Curis (2 are concerning!) that we have uncovered.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
