The Market Doesn't Like What It Sees From Arcturus Therapeutics Holdings Inc.'s (NASDAQ:ARCT) Revenues Yet As Shares Tumble 52%

Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) shares have had a horrible month, losing 52% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 46% in that time.

After such a large drop in price, Arcturus Therapeutics Holdings' price-to-sales (or "P/S") ratio of 2.4x might make it look like a strong buy right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios above 11.3x and even P/S above 89x are quite common. 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.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Check out our latest analysis for Arcturus Therapeutics Holdings

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. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Arcturus Therapeutics Holdings will help you uncover what's on the horizon.

How Is Arcturus Therapeutics Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Arcturus Therapeutics Holdings' 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 25%. Even so, admirably revenue has lifted 201% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 23% each year during the coming three years according to the eleven analysts following the company. That's shaping up to be materially lower than the 130% each year growth forecast for the broader industry.

With this information, we can see why Arcturus Therapeutics Holdings is trading at a P/S lower than the industry. 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 Arcturus Therapeutics Holdings' P/S

Arcturus Therapeutics Holdings' P/S looks about as weak as its stock price lately. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Arcturus Therapeutics Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Arcturus Therapeutics Holdings you should know about.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.