Fortress Biotech, Inc. (NASDAQ:FBIO) Looks Inexpensive But Perhaps Not Attractive Enough
Fortress Biotech, Inc.'s (NASDAQ:FBIO) price-to-sales (or "P/S") ratio of 1.2x 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 13.1x and even P/S above 61x 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.
View our latest analysis for Fortress Biotech
What Does Fortress Biotech's Recent Performance Look Like?
While the industry has experienced revenue growth lately, Fortress Biotech's 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. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Keen to find out how analysts think Fortress Biotech's 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?
The only time you'd be truly comfortable seeing a P/S as depressed as Fortress Biotech's is when the company's growth is on track to lag the industry decidedly.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 21%. Even so, admirably revenue has lifted 49% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Looking ahead now, revenue is anticipated to climb by 58% per year during the coming three years according to the five analysts following the company. With the industry predicted to deliver 102% growth per annum, the company is positioned for a weaker revenue result.
In light of this, it's understandable that Fortress Biotech's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What Does Fortress Biotech's P/S Mean For Investors?
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.
We've established that Fortress Biotech maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.
There are also other vital risk factors to consider and we've discovered 4 warning signs for Fortress Biotech (1 doesn't sit too well with us!) that you should be aware of before investing here.
If these risks are making you reconsider your opinion on Fortress Biotech, 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
