Adaptimmune Therapeutics plc (NASDAQ:ADAP) shares have continued their recent momentum with a 29% 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 45% over that time.

Although its price has surged higher, Adaptimmune 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 13.2x and even P/S higher than 56x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How Adaptimmune Therapeutics Has Been Performing

With revenue growth that's superior to most other companies of late, Adaptimmune Therapeutics has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

How Is Adaptimmune Therapeutics' Revenue Growth Trending?

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

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 8.0% each year as estimated by the five analysts watching the company. That's not great when the rest of the industry is expected to grow by 231% per year.

With this information, we are not surprised that Adaptimmune 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. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Adaptimmune Therapeutics' P/S?

Adaptimmune Therapeutics' recent share price jump still sees fails to bring its P/S alongside 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 Adaptimmune Therapeutics' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Adaptimmune Therapeutics' poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with Adaptimmune Therapeutics (at least 1 which can't be ignored), and understanding these should be part of your investment process.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.