Camurus AB (publ) (STO:CAMX) Investors Are Less Pessimistic Than Expected

Camurus AB (publ)'s (STO:CAMX) price-to-sales (or "P/S") ratio of 17.7x might make it look like a strong sell right now compared to the Pharmaceuticals industry in Sweden, where around half of the companies have P/S ratios below 7.7x and even P/S below 2x 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 so lofty.

View our latest analysis for Camurus

What Does Camurus' Recent Performance Look Like?

Recent times haven't been great for Camurus as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Camurus' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Camurus' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 85% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 31% per year over the next three years. That's shaping up to be materially lower than the 35% per annum growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that Camurus' P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Camurus' P/S

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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Camurus, this doesn't appear to be impacting the P/S in the slightest. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Camurus with six simple checks on some of these key factors.

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.