Capricor Therapeutics, Inc. (NASDAQ:CAPR) shares have had a really impressive month, gaining 51% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 65% in the last year.

Although its price has surged higher, Capricor Therapeutics' price-to-sales (or "P/S") ratio of 8.6x might still make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 13.8x and even P/S above 74x 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 limited.

How Has Capricor Therapeutics Performed Recently?

Capricor Therapeutics certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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 out of favour.

How Is Capricor Therapeutics' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Capricor Therapeutics' to be considered reasonable.

Retrospectively, the last year delivered an explosive gain to the company's top line. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 69% each year during the coming three years according to the four analysts following the company. With the industry predicted to deliver 164% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Capricor Therapeutics' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

The latest share price surge wasn't enough to lift Capricor Therapeutics' P/S close to the industry median. 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.

As we suspected, our examination of Capricor Therapeutics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Capricor Therapeutics.

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.