A Piece Of The Puzzle Missing From hVIVO plc's (LON:HVO) Share Price

With a price-to-sales (or "P/S") ratio of 2.2x hVIVO plc (LON:HVO) may be sending bullish signals at the moment, given that almost half of all the Life Sciences companies in the United Kingdom have P/S ratios greater than 3.6x and even P/S higher than 12x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for hVIVO

How Has hVIVO Performed Recently?

With revenue growth that's inferior to most other companies of late, hVIVO has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is hVIVO's Revenue Growth Trending?

In order to justify its P/S ratio, hVIVO would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 30%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 8.9% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 0.05%, which is noticeably less attractive.

In light of this, it's peculiar that hVIVO's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

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.

hVIVO's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with hVIVO.

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.