Investors Appear Satisfied With MaxCyte, Inc.'s (LON:MXCT) Prospects As Shares Rocket 27%

MaxCyte, Inc. (LON:MXCT) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Since its price has surged higher, MaxCyte may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 11.3x, since almost half of all companies in the Life Sciences industry in the United Kingdom have P/S ratios under 4.7x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for MaxCyte

What Does MaxCyte's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, MaxCyte has been doing quite well of late. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is MaxCyte's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as MaxCyte's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.8% last year. This was backed up an excellent period prior to see revenue up by 64% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 18% each year over the next three years. With the industry only predicted to deliver 11% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why MaxCyte's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On MaxCyte's P/S

The strong share price surge has lead to MaxCyte's P/S soaring as well. 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 MaxCyte's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with MaxCyte (at least 2 which can't be ignored), and understanding them should be part of your investment process.

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.