Not Many Are Piling Into Allergy Therapeutics plc (LON:AGY) Just Yet

With a median price-to-sales (or "P/S") ratio of close to 3.8x in the Pharmaceuticals industry in the United Kingdom, you could be forgiven for feeling indifferent about Allergy Therapeutics plc's (LON:AGY) P/S ratio, which comes in at about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Allergy Therapeutics

How Allergy Therapeutics Has Been Performing

Allergy Therapeutics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For Allergy Therapeutics?

In order to justify its P/S ratio, Allergy Therapeutics would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. As a result, revenue from three years ago have also fallen 35% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 13% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.4%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Allergy Therapeutics' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Despite enticing revenue growth figures that outpace the industry, Allergy Therapeutics' P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Allergy Therapeutics (2 are a bit unpleasant!) that you need to be mindful of.

If you're unsure about the strength of Allergy Therapeutics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.