Agenus Inc. (NASDAQ:AGEN) shares have had a horrible month, losing 42% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 68% share price decline.
After such a large drop in price, Agenus may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.4x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 15.2x and even P/S higher than 72x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
NasdaqCM:AGEN Price to Sales Ratio vs Industry March 16th 2024
How Agenus Has Been Performing
With revenue growth that's inferior to most other companies of late, Agenus has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Agenus will help you uncover what's on the horizon.
Is There Any Revenue Growth Forecasted For Agenus?
The only time you'd be truly comfortable seeing a P/S as depressed as Agenus' is when the company's growth is on track to lag the industry decidedly.
If we review the last year of revenue growth, the company posted a terrific increase of 59%. The strong recent performance means it was also able to grow revenue by 77% 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 24% per annum during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 197% each year, which is noticeably more attractive.
In light of this, it's understandable that Agenus' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Key Takeaway
Shares in Agenus have plummeted and its P/S has followed suit. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that Agenus maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
We don't want to rain on the parade too much, but we did also find 5 warning signs for Agenus (1 shouldn't be ignored!) that you need to be mindful 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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