Why Investors Shouldn't Be Surprised By Oxford Biomedica plc's (LON:OXB) Low P/S
With a price-to-sales (or "P/S") ratio of 2.9x Oxford Biomedica plc (LON:OXB) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in the United Kingdom have P/S ratios greater than 20.3x and even P/S higher than 164x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
Check out our latest analysis for Oxford Biomedica
What Does Oxford Biomedica's P/S Mean For Shareholders?
Oxford Biomedica 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. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. 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.
Want the full picture on analyst estimates for the company? Then our free report on Oxford Biomedica will help you uncover what's on the horizon.
How Is Oxford Biomedica's Revenue Growth Trending?
Oxford Biomedica's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.0%. Even so, admirably revenue has lifted 119% in aggregate from three years ago, notwithstanding the last 12 months. 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.
Looking ahead now, revenue is anticipated to climb by 8.2% per year during the coming three years according to the seven analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 39% per year, which is noticeably more attractive.
With this in consideration, its clear as to why Oxford Biomedica's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Bottom Line On Oxford Biomedica's P/S
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.
As expected, our analysis of Oxford Biomedica's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.
Having said that, be aware Oxford Biomedica is showing 1 warning sign in our investment analysis, you should know about.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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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