CytomX Therapeutics, Inc. (NASDAQ:CTMX) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground.    Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 25% in the last twelve months.  

Even after such a large jump in price, CytomX Therapeutics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.3x and even P/S higher than 47x 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.  

See our latest analysis for CytomX Therapeutics

NasdaqGS:CTMX Price to Sales Ratio vs Industry November 26th 2023

How CytomX Therapeutics Has Been Performing

Recent times have been advantageous for CytomX Therapeutics as its revenues have been rising faster than most other companies.   Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed.  If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.    

Want the full picture on analyst estimates for the company? Then our free report on CytomX Therapeutics will help you uncover what's on the horizon.  

Is There Any Revenue Growth Forecasted For CytomX Therapeutics?  

In order to justify its P/S ratio, CytomX Therapeutics would need to produce anemic growth that's substantially trailing the industry.  

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months.   Still, revenue has barely risen at all from three years ago in total, which is not ideal.  So it appears to us that the company has had a mixed result in terms of growing revenue over that time.  

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 8.3%  each year as estimated by the seven analysts watching the company.  Meanwhile, the broader industry is forecast to expand by 196% per year, which paints a poor picture.

With this information, we are not surprised that CytomX Therapeutics 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.  

The Final Word

Even after such a strong price move, CytomX Therapeutics' P/S still trails the rest of the industry.      Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that CytomX Therapeutics' P/S is on the lower end of the spectrum.   Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises.  It's hard to see the share price rising strongly in the near future under these circumstances.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for CytomX Therapeutics (2 don't sit too well with us!) that you need to be mindful of.  

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.