Caribou Biosciences, Inc.'s (NASDAQ:CRBU) Share Price Boosted 39% But Its Business Prospects Need A Lift Too

Those holding Caribou Biosciences, Inc. (NASDAQ:CRBU) shares would be relieved that the share price has rebounded 39% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 62% share price decline over the last year.

Even after such a large jump in price, Caribou Biosciences' price-to-sales (or "P/S") ratio of 6.6x might still make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 11.5x and even P/S above 63x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Caribou Biosciences

How Has Caribou Biosciences Performed Recently?

Recent times have been advantageous for Caribou Biosciences as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Caribou Biosciences?

In order to justify its P/S ratio, Caribou Biosciences would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 127% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 173% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 27% per year during the coming three years according to the eight analysts following the company. That's shaping up to be materially lower than the 193% each year growth forecast for the broader industry.

In light of this, it's understandable that Caribou Biosciences' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Caribou Biosciences' P/S?

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

We've established that Caribou Biosciences maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, 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 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 Caribou Biosciences (1 is a bit concerning!) 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.

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