AnaptysBio, Inc.'s (NASDAQ:ANAB) Price Is Right But Growth Is Lacking After Shares Rocket 30%

Despite an already strong run, AnaptysBio, Inc. (NASDAQ:ANAB) shares have been powering on, with a gain of 30% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.4% in the last twelve months.

Although its price has surged higher, AnaptysBio's price-to-sales (or "P/S") ratio of 6.4x might still make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 8.7x and even P/S above 47x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for AnaptysBio

What Does AnaptysBio's Recent Performance Look Like?

AnaptysBio could be doing better as it's been growing revenue less than most other companies lately. 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.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The latest three year period has also seen an excellent 44% overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 7.4% each year as estimated by the eleven analysts watching the company. Meanwhile, the broader industry is forecast to expand by 147% per annum, which paints a poor picture.

With this in consideration, we find it intriguing that AnaptysBio's P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From AnaptysBio's P/S?

The latest share price surge wasn't enough to lift AnaptysBio's P/S close to the industry median. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that AnaptysBio's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, AnaptysBio's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with AnaptysBio (including 1 which shouldn't be ignored).

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.