Arcturus Therapeutics Holdings Inc.'s (NASDAQ:ARCT) Price Is Right But Growth Is Lacking After Shares Rocket 41%

Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) shareholders are no doubt pleased to see that the share price has bounced 41% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 53% share price drop in the last twelve months.

Even after such a large jump in price, Arcturus Therapeutics Holdings may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2.3x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.3x and even P/S higher than 49x 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.

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What Does Arcturus Therapeutics Holdings' P/S Mean For Shareholders?

Arcturus Therapeutics Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Arcturus Therapeutics Holdings?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.7%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

Shifting to the future, estimates from the eleven analysts covering the company suggest revenue should grow by 26% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 157% per year, which is noticeably more attractive.

With this in consideration, its clear as to why Arcturus Therapeutics Holdings' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Even after such a strong price move, Arcturus Therapeutics Holdings' P/S still trails the rest of the industry. 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.

As we suspected, our examination of Arcturus Therapeutics Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Arcturus Therapeutics Holdings with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Arcturus Therapeutics Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.