Oxford Nanopore Technologies plc's (LON:ONT) Share Price Is Still Matching Investor Opinion Despite 25% Slump

To the annoyance of some shareholders, Oxford Nanopore Technologies plc (LON:ONT) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 18% share price drop.

Even after such a large drop in price, Oxford Nanopore Technologies may still be sending sell signals at present with a price-to-sales (or "P/S") ratio of 6.2x, when you consider almost half of the companies in the Life Sciences industry in the United Kingdom have P/S ratios under 4.7x and even P/S lower than 1.7x 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 elevated P/S.

See our latest analysis for Oxford Nanopore Technologies

How Oxford Nanopore Technologies Has Been Performing

With revenue growth that's inferior to most other companies of late, Oxford Nanopore Technologies has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Oxford Nanopore Technologies would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a decent 3.4% gain to the company's revenues. Pleasingly, revenue has also lifted 35% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 27% each year as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 12% per annum growth forecast for the broader industry.

With this in mind, it's not hard to understand why Oxford Nanopore Technologies' 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.

What Does Oxford Nanopore Technologies' P/S Mean For Investors?

There's still some elevation in Oxford Nanopore Technologies' P/S, even if the same can't be said for its share price recently. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Oxford Nanopore Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for Oxford Nanopore Technologies that you should be aware of.

If these risks are making you reconsider your opinion on Oxford Nanopore Technologies, 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.