Aligos Therapeutics, Inc. (NASDAQ:ALGS) Stock Catapults 27% Though Its Price And Business Still Lag The Industry

Despite an already strong run, Aligos Therapeutics, Inc. (NASDAQ:ALGS) shares have been powering on, with a gain of 27% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 20% is also fairly reasonable.

Even after such a large jump in price, Aligos Therapeutics may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.2x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 13.4x and even P/S higher than 70x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Aligos Therapeutics

What Does Aligos Therapeutics' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Aligos Therapeutics has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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.

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

How Is Aligos Therapeutics' Revenue Growth Trending?

Aligos Therapeutics' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the two analysts covering the company suggest revenue growth is heading into negative territory, declining 100% each year over the next three years. With the industry predicted to deliver 168% growth per year, that's a disappointing outcome.

With this in consideration, we find it intriguing that Aligos Therapeutics' P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Even after such a strong price move, Aligos Therapeutics' P/S still trails the rest of the industry. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Aligos Therapeutics' P/S is on the lower end of the spectrum. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Before you settle on your opinion, we've discovered 4 warning signs for Aligos Therapeutics (1 shouldn't be ignored!) 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.