Investors Give Adaptive Biotechnologies Corporation (NASDAQ:ADPT) Shares A 26% Hiding

To the annoyance of some shareholders, Adaptive Biotechnologies Corporation (NASDAQ:ADPT) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 27% share price drop.

In spite of the heavy fall in price, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 15x, you may still consider Adaptive Biotechnologies as a highly attractive investment with its -4.8x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Adaptive Biotechnologies certainly has been doing a good job lately as it's been growing earnings more than most other companies. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Adaptive Biotechnologies

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

How Is Adaptive Biotechnologies' Growth Trending?

In order to justify its P/E ratio, Adaptive Biotechnologies would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered an exceptional 16% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Shifting to the future, estimates from the nine analysts covering the company suggest earnings should grow by 14% each year over the next three years. With the market only predicted to deliver 11% each year, the company is positioned for a stronger earnings result.

With this information, we find it odd that Adaptive Biotechnologies is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Adaptive Biotechnologies' P/E?

Having almost fallen off a cliff, Adaptive Biotechnologies' share price has pulled its P/E way down as well. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Adaptive Biotechnologies' analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Adaptive Biotechnologies that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.