There's No Escaping Karyopharm Therapeutics Inc.'s (NASDAQ:KPTI) Muted Revenues Despite A 27% Share Price Rise
Karyopharm Therapeutics Inc. (NASDAQ:KPTI) shares have continued their recent momentum with a 27% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 40% over that time.
In spite of the firm bounce in price, Karyopharm Therapeutics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 3.1x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.5x and even P/S higher than 50x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
Check out our latest analysis for Karyopharm Therapeutics
How Karyopharm Therapeutics Has Been Performing
Karyopharm Therapeutics hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Keen to find out how analysts think Karyopharm Therapeutics' future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, Karyopharm Therapeutics would need to produce anemic growth that's substantially trailing the industry.
Retrospectively, the last year delivered a frustrating 25% decrease to the company's top line. Still, the latest three year period has seen an excellent 284% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the nine analysts watching the company. That's shaping up to be materially lower than the 92% each year growth forecast for the broader industry.
With this information, we can see why Karyopharm Therapeutics is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Bottom Line On Karyopharm Therapeutics' P/S
Shares in Karyopharm Therapeutics have risen appreciably however, its P/S is still subdued. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
We've established that Karyopharm Therapeutics maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Don't forget that there may be other risks. For instance, we've identified 5 warning signs for Karyopharm Therapeutics (1 is a bit concerning) you should be aware of.
If these risks are making you reconsider your opinion on Karyopharm 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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