DBV Technologies S.A.'s (EPA:DBV) 41% Share Price Surge Not Quite Adding Up

DBV Technologies S.A. (EPA:DBV) shareholders would be excited to see that the share price has had a great month, posting a 41% gain and recovering from prior weakness. But the last month did very little to improve the 55% share price decline over the last year.

After such a large jump in price, DBV Technologies may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 7.3x, when you consider almost half of the companies in the Biotechs industry in France have P/S ratios under 4.4x and even P/S lower than 2x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for DBV Technologies

How DBV Technologies Has Been Performing

DBV Technologies could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is DBV Technologies' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 163% last year. Pleasingly, revenue has also lifted 214% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 4.7% each year during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 61% per year growth forecast for the broader industry.

With this information, we find it concerning that DBV Technologies is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does DBV Technologies' P/S Mean For Investors?

Shares in DBV Technologies have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for DBV Technologies, this doesn't appear to be impacting the P/S in the slightest. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

We don't want to rain on the parade too much, but we did also find 3 warning signs for DBV Technologies (2 are potentially serious!) that you need to be mindful 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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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.