The Market Lifts Ryvu Therapeutics S.A. (WSE:RVU) Shares 26% But It Can Do More

Ryvu Therapeutics S.A. (WSE:RVU) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 12% over that time.

Even after such a large jump in price, Ryvu Therapeutics' price-to-sales (or "P/S") ratio of 12.7x might still make it look like a buy right now compared to the Life Sciences industry in Poland, where around half of the companies have P/S ratios above 23.9x and even P/S above 265x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Ryvu Therapeutics

How Ryvu Therapeutics Has Been Performing

Ryvu Therapeutics 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 low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ryvu Therapeutics.

Is There Any Revenue Growth Forecasted For Ryvu Therapeutics?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Ryvu Therapeutics' to be considered reasonable.

Retrospectively, the last year delivered a decent 8.3% gain to the company's revenues. Pleasingly, revenue has also lifted 250% 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 12% per annum as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 12% per year, which is not materially different.

With this information, we find it odd that Ryvu Therapeutics is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Ryvu Therapeutics' P/S?

Despite Ryvu Therapeutics' share price climbing recently, its P/S still lags most other companies. 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 Ryvu Therapeutics' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Ryvu Therapeutics (1 can't be ignored!) that you should be aware of before investing here.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.