Veru Inc.'s (NASDAQ:VERU) Stock Retreats 38% But Revenues Haven't Escaped The Attention Of Investors

Unfortunately for some shareholders, the Veru Inc. (NASDAQ:VERU) share price has dived 38% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 92% share price decline.

Although its price has dipped substantially, you could still be forgiven for thinking Veru is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.2x, considering almost half the companies in the United States' Personal Products industry have P/S ratios below 1.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Veru

How Has Veru Performed Recently?

With revenue that's retreating more than the industry's average of late, Veru has been very sluggish. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Veru?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 54%. The last three years don't look nice either as the company has shrunk revenue by 23% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 71% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.6% per annum, which is noticeably less attractive.

In light of this, it's understandable that Veru's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Despite the recent share price weakness, Veru's P/S remains higher than most other companies in the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Veru maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Personal Products industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 5 warning signs for Veru you should be aware of, and 1 of them is concerning.

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.