ADMA Biologics, Inc. (NASDAQ:ADMA) Surges 30% Yet Its Low P/S Is No Reason For Excitement

Despite an already strong run, ADMA Biologics, Inc. (NASDAQ:ADMA) shares have been powering on, with a gain of 30% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

Although its price has surged higher, ADMA Biologics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 4.6x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 13.7x and even P/S higher than 56x 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.

See our latest analysis for ADMA Biologics

How Has ADMA Biologics Performed Recently?

Recent times have been advantageous for ADMA Biologics as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For ADMA Biologics?

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

If we review the last year of revenue growth, the company posted a terrific increase of 80%. 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.

Turning to the outlook, the next three years should generate growth of 17% per year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 240% each year, which is noticeably more attractive.

In light of this, it's understandable that ADMA Biologics' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Shares in ADMA Biologics have risen appreciably however, its P/S is still subdued. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of ADMA Biologics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for ADMA Biologics that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.