OSE Immunotherapeutics SA's (EPA:OSE) Share Price Boosted 31% But Its Business Prospects Need A Lift Too

OSE Immunotherapeutics SA (EPA:OSE) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 9.0% isn't as impressive.

Although its price has surged higher, OSE Immunotherapeutics' price-to-sales (or "P/S") ratio of 1.8x might still make it look like a strong buy right now compared to the wider Biotechs industry in France, where around half of the companies have P/S ratios above 4.2x and even P/S above 26x are quite common. 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 OSE Immunotherapeutics

How Has OSE Immunotherapeutics Performed Recently?

With revenue growth that's superior to most other companies of late, OSE Immunotherapeutics has been doing relatively well. 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.

Keen to find out how analysts think OSE Immunotherapeutics' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue growth, we see the company's revenues grew exponentially. Pleasingly, revenue has also lifted 217% in aggregate from three years ago, thanks to the last 12 months of explosive growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 27% per annum as estimated by the three analysts watching the company. Meanwhile, the broader industry is forecast to expand by 74% per annum, which paints a poor picture.

With this information, we are not surprised that OSE Immunotherapeutics is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On OSE Immunotherapeutics' P/S

OSE Immunotherapeutics' recent share price jump still sees fails to bring its P/S alongside the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of OSE Immunotherapeutics' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with OSE Immunotherapeutics (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

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.