Astellas Pharma Inc.'s (TSE:4503) Earnings Haven't Escaped The Attention Of Investors

It's not a stretch to say that Astellas Pharma Inc.'s (TSE:4503) price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" for companies in the Pharmaceuticals industry in Japan, where the median P/S ratio is around 2x. 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.

Check out our latest analysis for Astellas Pharma

How Astellas Pharma Has Been Performing

Astellas Pharma certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Astellas Pharma's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. The latest three year period has also seen an excellent 34% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 4.2% each year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 6.0% per year growth forecast for the broader industry.

With this information, we can see why Astellas Pharma is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Astellas Pharma's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A Astellas Pharma's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Pharmaceuticals industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Having said that, be aware Astellas Pharma is showing 4 warning signs in our investment analysis, and 2 of those shouldn't be ignored.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.