Revenues Not Telling The Story For BioLife Solutions, Inc. (NASDAQ:BLFS) After Shares Rise 25%

BioLife Solutions, Inc. (NASDAQ:BLFS) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Notwithstanding the latest gain, the annual share price return of 6.2% isn't as impressive.

Following the firm bounce in price, when almost half of the companies in the United States' Life Sciences industry have price-to-sales ratios (or "P/S") below 3.4x, you may consider BioLife Solutions as a stock not worth researching with its 6.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for BioLife Solutions

How BioLife Solutions Has Been Performing

BioLife Solutions has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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?

In order to justify its P/S ratio, BioLife Solutions would need to produce outstanding growth that's well in excess of the industry.

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 16%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 160% in total over the last three years. 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.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 8.0% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 7.0% per annum, which is not materially different.

In light of this, it's curious that BioLife Solutions' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

What Does BioLife Solutions' P/S Mean For Investors?

BioLife Solutions' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Analysts are forecasting BioLife Solutions' revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. Right now we are uncomfortable with the relatively high share price as the predicted future revenues aren't likely to support such positive sentiment for long. A positive change is needed in order to justify the current price-to-sales ratio.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with BioLife Solutions, and understanding these should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.