C4 Therapeutics, Inc. (NASDAQ:CCCC) Held Back By Insufficient Growth Even After Shares Climb 33%

Despite an already strong run, C4 Therapeutics, Inc. (NASDAQ:CCCC) shares have been powering on, with a gain of 33% in the last thirty days. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 54% share price drop in the last twelve months.

Although its price has surged higher, C4 Therapeutics may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.5x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9x and even P/S higher than 67x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for C4 Therapeutics

How Has C4 Therapeutics Performed Recently?

Recent times haven't been great for C4 Therapeutics as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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How Is C4 Therapeutics' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like C4 Therapeutics' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 17% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 32% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 33% each year during the coming three years according to the six analysts following the company. With the industry predicted to deliver 119% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why C4 Therapeutics' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does C4 Therapeutics' P/S Mean For Investors?

Despite C4 Therapeutics' share price climbing recently, its P/S still lags most other companies. 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 C4 Therapeutics 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.

Before you settle on your opinion, we've discovered 2 warning signs for C4 Therapeutics that you should be aware of.

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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.