Enzo Biochem, Inc.'s (NYSE:ENZ) 33% Share Price Plunge Could Signal Some Risk

The Enzo Biochem, Inc. (NYSE:ENZ) share price has fared very poorly over the last month, falling by a substantial 33%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Enzo Biochem's P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in the United States is also close to 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Enzo Biochem

What Does Enzo Biochem's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Enzo Biochem over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Enzo Biochem, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Enzo Biochem's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Enzo Biochem's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.6%. The last three years don't look nice either as the company has shrunk revenue by 74% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 8.5% shows it's an unpleasant look.

With this in mind, we find it worrying that Enzo Biochem's P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does Enzo Biochem's P/S Mean For Investors?

Following Enzo Biochem's share price tumble, its P/S is just clinging on to the industry median P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look at Enzo Biochem revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Before you take the next step, you should know about the 3 warning signs for Enzo Biochem (1 is a bit concerning!) that we have uncovered.

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.