Pieris Pharmaceuticals, Inc.'s (NASDAQ:PIRS) Shares Lagging The Industry But So Is The Business
Pieris Pharmaceuticals, Inc.'s (NASDAQ:PIRS) price-to-sales (or "P/S") ratio of 2.3x 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.
View our latest analysis for Pieris Pharmaceuticals
How Pieris Pharmaceuticals Has Been Performing
While the industry has experienced revenue growth lately, Pieris Pharmaceuticals' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
Keen to find out how analysts think Pieris Pharmaceuticals' future stacks up against the industry? In that case, our free report is a great place to start.
How Is Pieris Pharmaceuticals' Revenue Growth Trending?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like Pieris Pharmaceuticals' to be considered reasonable.
Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 44% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to slump, contracting by 25% per annum during the coming three years according to the dual analysts following the company. With the industry predicted to deliver 104% growth per year, that's a disappointing outcome.
With this information, we are not surprised that Pieris Pharmaceuticals 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. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.
What Does Pieris Pharmaceuticals' 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.
It's clear to see that Pieris Pharmaceuticals maintains its low P/S on the weakness of its forecast for sliding revenue, 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
We don't want to rain on the parade too much, but we did also find 5 warning signs for Pieris Pharmaceuticals (1 can't be ignored!) that you need to be mindful of.
If you're unsure about the strength of Pieris Pharmaceuticals' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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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