Investors Don't See Light At End Of Ultragenyx Pharmaceutical Inc.'s (NASDAQ:RARE) Tunnel
With a price-to-sales (or "P/S") ratio of 7.9x Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE) 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. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
Check out our latest analysis for Ultragenyx Pharmaceutical
What Does Ultragenyx Pharmaceutical's Recent Performance Look Like?
Recent times haven't been great for Ultragenyx Pharmaceutical 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.
Want the full picture on analyst estimates for the company? Then our free report on Ultragenyx Pharmaceutical will help you uncover what's on the horizon.
Is There Any Revenue Growth Forecasted For Ultragenyx Pharmaceutical?
In order to justify its P/S ratio, Ultragenyx Pharmaceutical would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 3.4% last year. Pleasingly, revenue has also lifted 250% in aggregate from three years ago, partly thanks to the last 12 months of growth. 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 22% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 95% per annum growth forecast for the broader industry.
With this in consideration, its clear as to why Ultragenyx Pharmaceutical's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What We Can Learn From Ultragenyx Pharmaceutical's P/S?
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
As we suspected, our examination of Ultragenyx Pharmaceutical's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.
It is also worth noting that we have found 2 warning signs for Ultragenyx Pharmaceutical that you need to take into consideration.
If these risks are making you reconsider your opinion on Ultragenyx Pharmaceutical, 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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