Market Participants Recognise Adaptive Biotechnologies Corporation's (NASDAQ:ADPT) Revenues Pushing Shares 40% Higher

Adaptive Biotechnologies Corporation (NASDAQ:ADPT) shares have continued their recent momentum with a 40% gain in the last month alone. The last month tops off a massive increase of 115% 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 7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Adaptive Biotechnologies

How Adaptive Biotechnologies Has Been Performing

Adaptive Biotechnologies certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Adaptive Biotechnologies' Revenue Growth Trending?

In order to justify its P/S ratio, Adaptive Biotechnologies would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.1%. The latest three year period has also seen a 16% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 22% per annum over the next three years. With the industry only predicted to deliver 6.8% per annum, the company is positioned for a stronger revenue result.

With this information, we can see why Adaptive Biotechnologies is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

The strong share price surge has lead to Adaptive Biotechnologies' P/S soaring as well. 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. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 2 warning signs for Adaptive Biotechnologies you should be aware of.

If these risks are making you reconsider your opinion on Adaptive Biotechnologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.