Revenues Working Against Akebia Therapeutics, Inc.'s (NASDAQ:AKBA) Share Price Following 25% Dive

Unfortunately for some shareholders, the Akebia Therapeutics, Inc. (NASDAQ:AKBA) share price has dived 25% in the last thirty days, prolonging recent pain. Longer-term, the stock has been solid despite a difficult 30 days, gaining 15% in the last year.

Since its price has dipped substantially, Akebia Therapeutics may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.8x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.8x and even P/S higher than 90x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Check out our latest analysis for Akebia Therapeutics

How Has Akebia Therapeutics Performed Recently?

With revenue growth that's inferior to most other companies of late, Akebia Therapeutics has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Akebia Therapeutics.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 31% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 19% per year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 134% per year, which is noticeably more attractive.

With this information, we can see why Akebia Therapeutics is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Akebia Therapeutics' P/S?

Akebia Therapeutics' P/S looks about as weak as its stock price lately. 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.

As expected, our analysis of Akebia Therapeutics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Akebia Therapeutics that you need to be mindful of.

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

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.