Acorda Therapeutics, Inc. (NASDAQ:ACOR) Surges 53% Yet Its Low P/S Is No Reason For Excitement

Acorda Therapeutics, Inc. (NASDAQ:ACOR) shareholders are no doubt pleased to see that the share price has bounced 53% in the last month, although it is still struggling to make up recently lost ground. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

Even after such a large jump in price, Acorda Therapeutics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.6x and even P/S higher than 49x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Acorda Therapeutics

How Has Acorda Therapeutics Performed Recently?

For example, consider that Acorda Therapeutics' financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Acorda Therapeutics?

In order to justify its P/S ratio, Acorda Therapeutics would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 10% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 33% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Comparing that to the industry, which is predicted to deliver 929% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Acorda Therapeutics' P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Acorda Therapeutics' P/S Mean For Investors?

Shares in Acorda Therapeutics have risen appreciably however, its P/S is still subdued. 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.

It's no surprise that Acorda Therapeutics maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 3 warning signs for Acorda Therapeutics 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.