Revenues Working Against Valneva SE's (EPA:VLA) Share Price Following 29% Dive

Valneva SE (EPA:VLA) shares have had a horrible month, losing 29% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Since its price has dipped substantially, Valneva's price-to-sales (or "P/S") ratio of 2.8x might 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 5.7x and even P/S above 14x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Valneva

What Does Valneva's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Valneva's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. 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 Valneva.

How Is Valneva's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 64%. Still, the latest three year period has seen an excellent 42% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 33% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 64% per annum, which is noticeably more attractive.

In light of this, it's understandable that Valneva's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Valneva's P/S

Shares in Valneva have plummeted and its P/S has followed suit. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Valneva's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Valneva that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.