Market Participants Recognise Aquestive Therapeutics, Inc.'s (NASDAQ:AQST) Revenues Pushing Shares 27% Higher

Aquestive Therapeutics, Inc. (NASDAQ:AQST) shares have continued their recent momentum with a 27% gain in the last month alone. The annual gain comes to 179% following the latest surge, making investors sit up and take notice.

After such a large jump in price, Aquestive Therapeutics may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 6.5x, since almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios under 3.1x and even P/S lower than 0.9x 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 lofty.

See our latest analysis for Aquestive Therapeutics

What Does Aquestive Therapeutics' Recent Performance Look Like?

Aquestive Therapeutics certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

Aquestive Therapeutics' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. Pleasingly, revenue has also lifted 39% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 22% per annum over the next three years. That's shaping up to be materially higher than the 16% each year growth forecast for the broader industry.

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.

The Final Word

Shares in Aquestive Therapeutics have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

As we suspected, our examination of Aquestive Therapeutics' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 4 warning signs for Aquestive Therapeutics you should be aware of, and 1 of them shouldn't be ignored.

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.