PolyPeptide Group AG (VTX:PPGN) Might Not Be As Mispriced As It Looks After Plunging 28%

To the annoyance of some shareholders, PolyPeptide Group AG (VTX:PPGN) shares are down a considerable 28% 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 52% loss during that time.

Since its price has dipped substantially, PolyPeptide Group may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.5x, since almost half of all companies in the Life Sciences industry in Switzerland have P/S ratios greater than 3.7x and even P/S higher than 6x 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 so limited.

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View our latest analysis for PolyPeptide Group

What Does PolyPeptide Group's Recent Performance Look Like?

PolyPeptide Group certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. One possibility is that the P/S ratio is low because investors think the company's revenue is going to fall away like everyone else's soon. Those who are bullish on PolyPeptide Group will be hoping that this isn't the case and the company continues to beat out the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on PolyPeptide Group .

Is There Any Revenue Growth Forecasted For PolyPeptide Group?

In order to justify its P/S ratio, PolyPeptide Group would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a decent 5.1% gain to the company's revenues. The latest three year period has also seen a 19% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next three years should generate growth of 17% per annum as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 14% each year growth forecast for the broader industry.

With this information, we find it odd that PolyPeptide Group is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On PolyPeptide Group's P/S

Shares in PolyPeptide Group have plummeted and its P/S has followed suit. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A look at PolyPeptide Group's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for PolyPeptide Group that you need to take into consideration.

If these risks are making you reconsider your opinion on PolyPeptide Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.