To the annoyance of some shareholders, Adaptive Biotechnologies Corporation (NASDAQ:ADPT) shares are down a considerable 33% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 68% loss during that time.
Since its price has dipped substantially, Adaptive Biotechnologies' price-to-sales (or "P/S") ratio of 2.3x might make it look like a buy right now compared to the Life Sciences industry in the United States, where around half of the companies have P/S ratios above 3.9x and even P/S above 7x 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.
NasdaqGS:ADPT Price to Sales Ratio vs Industry April 4th 2024
What Does Adaptive Biotechnologies' Recent Performance Look Like?
Recent times haven't been great for Adaptive Biotechnologies as its revenue has been falling quicker than most other companies. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. You'd much rather the company improve its revenue performance if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Keen to find out how analysts think Adaptive Biotechnologies' future stacks up against the industry? In that case, our free report is a great place to start.
Do Revenue Forecasts Match The Low P/S Ratio?
In order to justify its P/S ratio, Adaptive Biotechnologies would need to produce sluggish growth that's trailing the industry.
Retrospectively, the last year delivered a frustrating 8.1% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 73% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Turning to the outlook, the next three years should generate growth of 19% each year as estimated by the eight analysts watching the company. With the industry only predicted to deliver 6.4% each year, the company is positioned for a stronger revenue result.
With this information, we find it odd that Adaptive Biotechnologies is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Final Word
Adaptive Biotechnologies' recently weak share price has pulled its P/S back below other Life Sciences companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
Adaptive Biotechnologies' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.
Before you take the next step, you should know about the 2 warning signs for Adaptive Biotechnologies that we have uncovered.
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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