The Market Doesn't Like What It Sees From Indivior PLC's (LON:INDV) Revenues Yet As Shares Tumble 26%

Indivior PLC (LON:INDV) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 56% loss during that time.

Following the heavy fall in price, Indivior may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1x, considering almost half of all companies in the Pharmaceuticals industry in the United Kingdom have P/S ratios greater than 3.7x and even P/S higher than 6x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Indivior

What Does Indivior's P/S Mean For Shareholders?

There hasn't been much to differentiate Indivior's and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If not, then existing shareholders have reason to be optimistic 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 Indivior.

How Is Indivior's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. This was backed up an excellent period prior to see revenue up by 57% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 0.08% per year over the next three years. That's shaping up to be materially lower than the 5.6% per year growth forecast for the broader industry.

In light of this, it's understandable that Indivior's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Indivior's P/S looks about as weak as its stock price lately. 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.

We've established that Indivior maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Indivior (including 1 which is potentially serious).

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.