Investors Aren't Buying Apellis Pharmaceuticals, Inc.'s (NASDAQ:APLS) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 5.8x Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is definitely a stock worth checking out, seeing as almost half of all the Biotechs companies in the United States have P/S ratios greater than 12.4x and even P/S above 68x 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 highly reduced P/S.

See our latest analysis for Apellis Pharmaceuticals

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

Recent times have been advantageous for Apellis Pharmaceuticals as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Apellis 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 Apellis Pharmaceuticals?

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

Retrospectively, the last year delivered an exceptional 241% gain to the company's top line. The latest three year period has also seen an excellent 150% 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.

Turning to the outlook, the next three years should generate growth of 34% per annum as estimated by the analysts watching the company. With the industry predicted to deliver 146% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Apellis 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 Apellis Pharmaceuticals' P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Apellis 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. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 2 warning signs for Apellis Pharmaceuticals that you should be aware of.

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.