PolyPeptide Group AG's (VTX:PPGN) Shares Leap 28% Yet They're Still Not Telling The Full Story

Despite an already strong run, PolyPeptide Group AG (VTX:PPGN) shares have been powering on, with a gain of 28% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

Although its price has surged higher, PolyPeptide Group may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.6x, since almost half of all companies in the Life Sciences industry in Switzerland have P/S ratios greater than 4.1x and even P/S higher than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for PolyPeptide Group

How PolyPeptide Group Has Been Performing

Recent times have been advantageous for PolyPeptide Group as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is PolyPeptide Group's Revenue Growth Trending?

PolyPeptide Group'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. The latest three year period has also seen an excellent 31% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 15% per annum during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 12% each year growth forecast for the broader industry.

With this in consideration, we find it intriguing that PolyPeptide Group's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

The latest share price surge wasn't enough to lift PolyPeptide Group's P/S close to the industry median. 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.

To us, it seems PolyPeptide Group currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Having said that, be aware PolyPeptide Group is showing 1 warning sign in our investment analysis, you should know about.

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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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.