Assembly Biosciences, Inc. (NASDAQ:ASMB) Looks Inexpensive After Falling 27% But Perhaps Not Attractive Enough

To the annoyance of some shareholders, Assembly Biosciences, Inc. (NASDAQ:ASMB) shares are down a considerable 27% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 37% in that time.

Following the heavy fall in price, Assembly Biosciences may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.3x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 8.5x and even P/S higher than 47x 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 limited.

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Check out our latest analysis for Assembly Biosciences

What Does Assembly Biosciences' P/S Mean For Shareholders?

Assembly Biosciences could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Do Revenue Forecasts Match The Low P/S Ratio?

Assembly Biosciences' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 61% each year as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 170% per annum growth forecast for the broader industry.

In light of this, it's understandable that Assembly Biosciences' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Assembly Biosciences' P/S

Shares in Assembly Biosciences have plummeted and its P/S has followed suit. 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 Assembly Biosciences' 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Assembly Biosciences (at least 2 which don't sit too well with us), and understanding them should be part of your investment process.

If you're unsure about the strength of Assembly Biosciences' 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.