BioLife Solutions, Inc.'s (NASDAQ:BLFS) Shares Climb 27% But Its Business Is Yet to Catch Up

BioLife Solutions, Inc. (NASDAQ:BLFS) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 79% in the last year.

Following the firm bounce in price, you could be forgiven for thinking BioLife Solutions is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 8.4x, considering almost half the companies in the United States' Life Sciences industry have P/S ratios below 3.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for BioLife Solutions

What Does BioLife Solutions' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, BioLife Solutions has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think BioLife Solutions' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like BioLife Solutions' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 52% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 5.6% per annum as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 7.0% per year, which is not materially different.

With this information, we find it interesting that BioLife Solutions is trading at a high P/S compared to the industry. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for disappointment if the P/S falls to levels more in line with the growth outlook.

The Final Word

The strong share price surge has lead to BioLife Solutions' P/S soaring as well. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Seeing as its revenues are forecast to grow in line with the wider industry, it would appear that BioLife Solutions currently trades on a higher than expected P/S. When we see revenue growth that just matches the industry, we don't expect elevates P/S figures to remain inflated for the long-term. A positive change is needed in order to justify the current price-to-sales ratio.

You should always think about risks. Case in point, we've spotted 1 warning sign for BioLife Solutions you should be aware of.

If these risks are making you reconsider your opinion on BioLife Solutions, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.