Improved Revenues Required Before Bavarian Nordic A/S (CPH:BAVA) Shares Find Their Feet

When close to half the companies in the Biotechs industry in Denmark have price-to-sales ratios (or "P/S") above 12.6x, you may consider Bavarian Nordic A/S (CPH:BAVA) as a highly attractive investment with its 4.6x P/S ratio. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Bavarian Nordic

What Does Bavarian Nordic's P/S Mean For Shareholders?

Recent times haven't been great for Bavarian Nordic as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited 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 Bavarian Nordic.

How Is Bavarian Nordic's Revenue Growth Trending?

Bavarian Nordic's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 66%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 24% per annum over the next three years. With the industry predicted to deliver 48% growth per annum, the company is positioned for a weaker revenue result.

With this information, we can see why Bavarian Nordic is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Bavarian Nordic's P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of Bavarian Nordic's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Bavarian Nordic 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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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.