Despite an already strong run, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) shares have been powering on, with a gain of 29% in the last thirty days. Notwithstanding the latest gain, the annual share price return of 3.9% isn't as impressive.

Although its price has surged higher, Sarepta Therapeutics' price-to-sales (or "P/S") ratio of 10.6x 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 13.9x and even P/S above 56x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Sarepta Therapeutics' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Sarepta Therapeutics has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Sarepta Therapeutics' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The strong recent performance means it was also able to grow revenue by 123% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 46% each year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 231% per year growth forecast for the broader industry.

With this information, we can see why Sarepta Therapeutics is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Sarepta Therapeutics' P/S Mean For Investors?

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

As we suspected, our examination of Sarepta 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 Sarepta Therapeutics.

If you're unsure about the strength of Sarepta Therapeutics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.