AC Immune SA (NASDAQ:ACIU) May Have Run Too Fast Too Soon With Recent 30% Price Plummet

The AC Immune SA (NASDAQ:ACIU) share price has fared very poorly over the last month, falling by a substantial 30%. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 22%.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about AC Immune's P/S ratio of 15.7x, since the median price-to-sales (or "P/S") ratio for the Biotechs industry in the United States is also close to 13.4x. 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 AC Immune

What Does AC Immune's Recent Performance Look Like?

AC Immune certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, AC Immune would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an explosive gain to the company's top line. Still, revenue has fallen 4.1% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 65% each year over the next three years. That's shaping up to be materially lower than the 164% per annum growth forecast for the broader industry.

In light of this, it's curious that AC Immune's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does AC Immune's P/S Mean For Investors?

AC Immune's plummeting stock price has brought its P/S back to a similar region as the rest of 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.

Our look at the analysts forecasts of AC Immune's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for AC Immune that you should be aware of.

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.