AnaptysBio, Inc. (NASDAQ:ANAB) May Have Run Too Fast Too Soon With Recent 33% Price Plummet

The AnaptysBio, Inc. (NASDAQ:ANAB) share price has fared very poorly over the last month, falling by a substantial 33%. Looking at the bigger picture, even after this poor month the stock is up 43% in the last year.

Although its price has dipped substantially, there still wouldn't be many who think AnaptysBio's price-to-sales (or "P/S") ratio of 11.7x is worth a mention when the median P/S in the United States' Biotechs industry is similar at about 12.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for AnaptysBio

What Does AnaptysBio's Recent Performance Look Like?

Recent times haven't been great for AnaptysBio as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For AnaptysBio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like AnaptysBio's to be considered reasonable.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 53% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 21% per annum as estimated by the eleven analysts watching the company. Meanwhile, the broader industry is forecast to expand by 129% each year, which paints a poor picture.

With this information, we find it concerning that AnaptysBio is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Final Word

Following AnaptysBio's share price tumble, its P/S is just clinging on to the industry median P/S. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It appears that AnaptysBio currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

You should always think about risks. Case in point, we've spotted 5 warning signs for AnaptysBio you should be aware of, and 1 of them makes us a bit uncomfortable.

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.