Caribou Biosciences, Inc.'s (NASDAQ:CRBU) Shares Bounce 25% But Its Business Still Trails The Industry

Caribou Biosciences, Inc. (NASDAQ:CRBU) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 51% share price drop in the last twelve months.

Although its price has surged higher, Caribou Biosciences may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 6.4x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 13x and even P/S higher than 73x are not unusual. 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.

Check out our latest analysis for Caribou Biosciences

What Does Caribou Biosciences' Recent Performance Look Like?

Recent times have been advantageous for Caribou Biosciences as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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.

How Is Caribou Biosciences' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 132%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 25% per annum as estimated by the eight analysts watching the company. That's shaping up to be materially lower than the 130% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Caribou Biosciences' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Caribou Biosciences' P/S Mean For Investors?

Shares in Caribou Biosciences have risen appreciably however, its P/S is still subdued. 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. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Caribou Biosciences (1 is significant!) that you should be aware of before investing here.

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.