Alnylam Pharmaceuticals, Inc.'s (NASDAQ:ALNY) Price Is Right But Growth Is Lacking

You may think that with a price-to-sales (or "P/S") ratio of 10.2x Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) is a stock worth checking out, seeing as almost half of all the Biotechs companies in the United States have P/S ratios greater than 14.9x and even P/S higher than 71x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Alnylam Pharmaceuticals

What Does Alnylam Pharmaceuticals' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Alnylam Pharmaceuticals has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Alnylam Pharmaceuticals?

In order to justify its P/S ratio, Alnylam Pharmaceuticals would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 76% gain to the company's top line. The latest three year period has also seen an excellent 271% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 19% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 146% per year growth forecast for the broader industry.

In light of this, it's understandable that Alnylam Pharmaceuticals' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

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.

As we suspected, our examination of Alnylam Pharmaceuticals' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Alnylam Pharmaceuticals (of which 1 can't be ignored!) you should know about.

If you're unsure about the strength of Alnylam Pharmaceuticals' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.