Kuros Biosciences AG (VTX:KURN) Stock Rockets 30% As Investors Are Less Pessimistic Than Expected

Kuros Biosciences AG (VTX:KURN) shares have had a really impressive month, gaining 30% after a shaky period beforehand. The last month tops off a massive increase of 288% in the last year.

After such a large jump in price, given around half the companies in Switzerland's Biotechs industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider Kuros Biosciences as a stock to avoid entirely with its 12.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

We've discovered 1 warning sign about Kuros Biosciences. View them for free.

See our latest analysis for Kuros Biosciences

What Does Kuros Biosciences' Recent Performance Look Like?

Recent times have been quite advantageous for Kuros Biosciences as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Kuros Biosciences' earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The High P/S?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Kuros Biosciences' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 125% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 440% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's alarming that Kuros Biosciences' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What Does Kuros Biosciences' P/S Mean For Investors?

The strong share price surge has lead to Kuros Biosciences' P/S soaring as well. 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.

The fact that Kuros Biosciences currently trades on a higher P/S relative to the industry is an oddity, since its recent three-year growth is lower than the wider industry forecast. When we observe slower-than-industry revenue growth alongside a high P/S ratio, we assume there to be a significant risk of the share price decreasing, which would result in a lower P/S ratio. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these the share price as being reasonable.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Kuros Biosciences that you should be aware 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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