To the annoyance of some shareholders, Alpha Teknova, Inc. (NASDAQ:TKNO) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The recent drop has obliterated the annual return, with the share price now down 9.1% over that longer period.
Since its price has dipped substantially, Alpha Teknova may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2x, since almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 3.4x and even P/S higher than 7x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
NasdaqGM:TKNO Price to Sales Ratio vs Industry April 24th 2024
How Alpha Teknova Has Been Performing
With revenue that's retreating more than the industry's average of late, Alpha Teknova has been very sluggish. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping the revenue slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.
Keen to find out how analysts think Alpha Teknova's future stacks up against the industry? In that case, our free report is a great place to start.
How Is Alpha Teknova's Revenue Growth Trending?
Alpha Teknova's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 17% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.
Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 36% per annum over the next three years. That's shaping up to be materially higher than the 6.5% each year growth forecast for the broader industry.
In light of this, it's peculiar that Alpha Teknova's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
What We Can Learn From Alpha Teknova's P/S?
Alpha Teknova's P/S has taken a dip along with its share price. 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.
A look at Alpha Teknova's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. 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.
There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for Alpha Teknova that you should be aware of.
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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