Improved Revenues Required Before Anika Therapeutics, Inc. (NASDAQ:ANIK) Shares Find Their Feet

With a price-to-sales (or "P/S") ratio of 1.4x Anika Therapeutics, Inc. (NASDAQ:ANIK) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 9.1x and even P/S higher than 61x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Anika Therapeutics

What Does Anika Therapeutics' P/S Mean For Shareholders?

Recent times haven't been great for Anika Therapeutics as its revenue has been rising slower than most other companies. 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.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as depressed as Anika Therapeutics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period was better as it's delivered a decent 13% overall rise in revenue. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 25% during the coming year according to the dual analysts following the company. That's not great when the rest of the industry is expected to grow by 103%.

With this in consideration, we find it intriguing that Anika 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. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Anika 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.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Anika Therapeutics with six simple checks.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.