Aquestive Therapeutics, Inc.'s (NASDAQ:AQST) Stock Retreats 27% But Revenues Haven't Escaped The Attention Of Investors

Aquestive Therapeutics, Inc. (NASDAQ:AQST) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 21%.

In spite of the heavy fall in price, Aquestive Therapeutics' price-to-sales (or "P/S") ratio of 15.2x might still make it look like a strong sell right now compared to other companies in the Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios below 4x and even P/S below 1.3x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Aquestive Therapeutics

What Does Aquestive Therapeutics' Recent Performance Look Like?

Aquestive Therapeutics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Aquestive Therapeutics?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 26%. As a result, revenue from three years ago have also fallen 9.7% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 54% per year during the coming three years according to the ten analysts following the company. With the industry only predicted to deliver 28% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Aquestive Therapeutics' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Aquestive Therapeutics' P/S?

Aquestive Therapeutics' shares may have suffered, but its P/S remains high. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Aquestive Therapeutics shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 3 warning signs for Aquestive Therapeutics (2 are concerning!) that we have uncovered.

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.