When you see that almost half of the companies in the Life Sciences industry in the United States have price-to-sales ratios (or "P/S") below 3.4x, Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI) looks to be giving off some sell signals with its 5.1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

What Does Maravai LifeSciences Holdings' Recent Performance Look Like?

Recent times haven't been great for Maravai LifeSciences Holdings as its revenue has been falling quicker than most other companies. Perhaps the market is predicting a change in fortunes for the company and is expecting them to blow past the rest of the industry, elevating the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Maravai LifeSciences Holdings would need to produce impressive growth in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 62%. As a result, revenue from three years ago have also fallen 28% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the analysts watching the company. With the industry only predicted to deliver 7.0% per annum, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Maravai LifeSciences Holdings' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Maravai LifeSciences Holdings' P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Maravai LifeSciences Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Life Sciences industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Maravai LifeSciences Holdings that you should be aware of.

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.