CytomX Therapeutics, Inc.'s (NASDAQ:CTMX) Revenues Are Not Doing Enough For Some Investors
CytomX Therapeutics, Inc.'s (NASDAQ:CTMX) price-to-sales (or "P/S") ratio of 2.1x might make it look like a strong buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 11.5x and even P/S above 53x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.
See our latest analysis for CytomX Therapeutics
What Does CytomX Therapeutics' Recent Performance Look Like?
Recent times haven't been great for CytomX Therapeutics as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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.
Keen to find out how analysts think CytomX Therapeutics' future stacks up against the industry? In that case, our free report is a great place to start.
Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, CytomX Therapeutics would need to produce anemic growth that's substantially trailing the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 42%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 7.5% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Looking ahead now, revenue is anticipated to slump, contracting by 1.7% per year during the coming three years according to the eight analysts following the company. That's not great when the rest of the industry is expected to grow by 104% per annum.
With this information, we are not surprised that CytomX Therapeutics is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
The Bottom Line On CytomX Therapeutics' P/S
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.
With revenue forecasts that are inferior to the rest of the industry, it's no surprise that CytomX Therapeutics' P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.
You should always think about risks. Case in point, we've spotted 2 warning signs for CytomX Therapeutics you should be aware of, and 1 of them makes us a bit uncomfortable.
If these risks are making you reconsider your opinion on CytomX Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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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