The Market Lifts Shield Therapeutics plc (LON:STX) Shares 76% But It Can Do More

Despite an already strong run, Shield Therapeutics plc (LON:STX) shares have been powering on, with a gain of 76% in the last thirty days. The annual gain comes to 112% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, there still wouldn't be many who think Shield Therapeutics' price-to-sales (or "P/S") ratio of 2.7x is worth a mention when it essentially matches the median P/S in the United Kingdom's Pharmaceuticals industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for Shield Therapeutics

What Does Shield Therapeutics' Recent Performance Look Like?

Shield Therapeutics certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For Shield Therapeutics?

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

Taking a look back first, we see that the company grew revenue by an impressive 93% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 46% each year over the next three years. That's shaping up to be materially higher than the 5.5% per annum growth forecast for the broader industry.

With this information, we find it interesting that Shield Therapeutics is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Shield Therapeutics' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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, Shield 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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Shield Therapeutics that you should be aware of.

If these risks are making you reconsider your opinion on Shield Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.