Lacklustre Performance Is Driving Atara Biotherapeutics, Inc.'s (NASDAQ:ATRA) 27% Price Drop

Unfortunately for some shareholders, the Atara Biotherapeutics, Inc. (NASDAQ:ATRA) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 61% loss during that time.

Following the heavy fall in price, Atara Biotherapeutics' price-to-sales (or "P/S") ratio of 0.4x 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 9.2x and even P/S above 54x 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.

Check out our latest analysis for Atara Biotherapeutics

How Atara Biotherapeutics Has Been Performing

With revenue growth that's superior to most other companies of late, Atara Biotherapeutics has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially 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 Atara Biotherapeutics will help you uncover what's on the horizon.

How Is Atara Biotherapeutics' Revenue Growth Trending?

Atara Biotherapeutics' 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.

Retrospectively, the last year delivered an explosive gain to the company's top line. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 14% each year as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 126% per year, which is noticeably more attractive.

In light of this, it's understandable that Atara Biotherapeutics' 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.

What Does Atara Biotherapeutics' P/S Mean For Investors?

Atara Biotherapeutics' P/S looks about as weak as its stock price lately. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Atara Biotherapeutics maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 6 warning signs for Atara Biotherapeutics (of which 3 shouldn't be ignored!) you should know about.

If you're unsure about the strength of Atara Biotherapeutics' 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.