Subdued Growth No Barrier To Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) With Shares Advancing 61%
Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) shares have continued their recent momentum with a 61% gain in the last month alone. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 9.2% in the last twelve months.
In spite of the firm bounce in price, it's still not a stretch to say that Xeris Biopharma Holdings' price-to-sales (or "P/S") ratio of 2.7x right now seems quite "middle-of-the-road" compared to the Pharmaceuticals industry in the United States, where the median P/S ratio is around 3.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for Xeris Biopharma Holdings
How Xeris Biopharma Holdings Has Been Performing
With revenue growth that's superior to most other companies of late, Xeris Biopharma Holdings has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Want the full picture on analyst estimates for the company? Then our free report on Xeris Biopharma Holdings will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The P/S?
Xeris Biopharma Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 122%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 27% each year over the next three years. That's shaping up to be materially lower than the 31% per year growth forecast for the broader industry.
With this information, we find it interesting that Xeris Biopharma Holdings is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.
The Key Takeaway
Its shares have lifted substantially and now Xeris Biopharma Holdings' P/S is back within range of the industry median. 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.
When you consider that Xeris Biopharma Holdings' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.
You need to take note of risks, for example - Xeris Biopharma Holdings has 3 warning signs (and 1 which is concerning) we think you should know about.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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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