Revenues Working Against Amneal Pharmaceuticals, Inc.'s (NASDAQ:AMRX) Share Price

With a price-to-sales (or "P/S") ratio of 0.7x Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) may be sending very bullish signals at the moment, given that almost half of all the Pharmaceuticals companies in the United States have P/S ratios greater than 2.9x and even P/S higher than 16x 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 Amneal Pharmaceuticals

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

Amneal Pharmaceuticals could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Amneal Pharmaceuticals' Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 8.2% gain to the company's revenues. The latest three year period has also seen a 20% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 5.6% per annum during the coming three years according to the four analysts following the company. With the industry predicted to deliver 17% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Amneal 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 Bottom Line On Amneal Pharmaceuticals' P/S

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 Amneal Pharmaceuticals maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Amneal Pharmaceuticals with six simple checks.

If these risks are making you reconsider your opinion on Amneal Pharmaceuticals, 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.