Adaptive Biotechnologies Corporation's (NASDAQ:ADPT) P/S Is Still On The Mark Following 28% Share Price Bounce

Despite an already strong run, Adaptive Biotechnologies Corporation (NASDAQ:ADPT) shares have been powering on, with a gain of 28% in the last thirty days. The last month tops off a massive increase of 185% in the last year.

Following the firm bounce in price, when almost half of the companies in the United States' Life Sciences industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider Adaptive Biotechnologies as a stock not worth researching with its 9.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Adaptive Biotechnologies

What Does Adaptive Biotechnologies' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Adaptive Biotechnologies has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Adaptive Biotechnologies.

How Is Adaptive Biotechnologies' Revenue Growth Trending?

Adaptive Biotechnologies' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. As a result, it also grew revenue by 29% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 20% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 6.9% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Adaptive Biotechnologies' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Adaptive Biotechnologies' P/S

Adaptive Biotechnologies' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 Adaptive Biotechnologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Life Sciences 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.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Adaptive Biotechnologies that you should be aware of.

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.