Improved Revenues Required Before Barinthus Biotherapeutics plc (NASDAQ:BRNS) Stock's 29% Jump Looks Justified

Barinthus Biotherapeutics plc (NASDAQ:BRNS) shareholders are no doubt pleased to see that the share price has bounced 29% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

In spite of the firm bounce in price, Barinthus Biotherapeutics' price-to-sales (or "P/S") ratio of 2.3x might still 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 8.3x and even P/S above 51x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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Check out our latest analysis for Barinthus Biotherapeutics

What Does Barinthus Biotherapeutics' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Barinthus Biotherapeutics has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Barinthus Biotherapeutics.

Do Revenue Forecasts Match The Low P/S Ratio?

Barinthus 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.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 100% during the coming year according to the three analysts following the company. Meanwhile, the broader industry is forecast to expand by 59%, which paints a poor picture.

With this information, we are not surprised that Barinthus Biotherapeutics is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Shares in Barinthus Biotherapeutics have risen appreciably however, its P/S is still subdued. 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 Barinthus Biotherapeutics' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Barinthus Biotherapeutics' poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Barinthus Biotherapeutics (2 are significant!) that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.