Lacklustre Performance Is Driving Coherus BioSciences, Inc.'s (NASDAQ:CHRS) 27% Price Drop

To the annoyance of some shareholders, Coherus BioSciences, Inc. (NASDAQ:CHRS) shares are down a considerable 27% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 64% share price decline.

Since its price has dipped substantially, Coherus BioSciences' 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 8.8x and even P/S above 53x 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.

See our latest analysis for Coherus BioSciences

How Has Coherus BioSciences Performed Recently?

Coherus BioSciences could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 Coherus BioSciences will help you uncover what's on the horizon.

How Is Coherus BioSciences' Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 3.8% gain to the company's revenues. Still, lamentably revenue has fallen 18% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 21% per year during the coming three years according to the four analysts following the company. Meanwhile, the broader industry is forecast to expand by 137% each year, which paints a poor picture.

With this in consideration, we find it intriguing that Coherus BioSciences' P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

Coherus BioSciences' P/S looks about as weak as its stock price lately. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It's clear to see that Coherus BioSciences maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Having said that, be aware Coherus BioSciences is showing 5 warning signs in our investment analysis, and 4 of those are significant.

If you're unsure about the strength of Coherus BioSciences' 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.