Investors Still Aren't Entirely Convinced By Oxford Biomedica plc's (LON:OXB) Revenues Despite 35% Price Jump

Oxford Biomedica plc (LON:OXB) shares have continued their recent momentum with a 35% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 76% in the last year.

Even after such a large jump in price, Oxford Biomedica may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.6x, since almost half of all companies in the Biotechs industry in the United Kingdom have P/S ratios greater than 15.7x and even P/S higher than 59x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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See our latest analysis for Oxford Biomedica

What Does Oxford Biomedica's P/S Mean For Shareholders?

Recent times haven't been great for Oxford Biomedica as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited 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 Oxford Biomedica.

Is There Any Revenue Growth Forecasted For Oxford Biomedica?

The only time you'd be truly comfortable seeing a P/S as depressed as Oxford Biomedica's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 44%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 9.8% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 26% per annum over the next three years. That's shaping up to be similar to the 25% per year growth forecast for the broader industry.

With this information, we find it odd that Oxford Biomedica is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Oxford Biomedica's P/S

Shares in Oxford Biomedica have risen appreciably however, its P/S is still subdued. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Oxford Biomedica's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Oxford Biomedica with six simple checks.

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