ADMA Biologics, Inc.'s (NASDAQ:ADMA) 27% Price Boost Is Out Of Tune With Revenues

ADMA Biologics, Inc. (NASDAQ:ADMA) shares have continued their recent momentum with a 27% gain in the last month alone. This latest share price bounce rounds out a remarkable 522% gain over the last twelve months.

After such a large jump in price, ADMA Biologics' price-to-sales (or "P/S") ratio of 14.6x might make it look like a sell right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios below 11.8x and even P/S below 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for ADMA Biologics

What Does ADMA Biologics' Recent Performance Look Like?

Recent times haven't been great for ADMA Biologics as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on ADMA Biologics will help you uncover what's on the horizon.

How Is ADMA Biologics' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 59% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. 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 19% per year as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 146% per annum growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that ADMA Biologics' P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Final Word

ADMA Biologics shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

We've concluded that ADMA Biologics currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. At these price levels, investors should remain cautious, particularly if things don't improve.

Before you settle on your opinion, we've discovered 4 warning signs for ADMA Biologics 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.