Champions Oncology, Inc.'s (NASDAQ:CSBR) Shares Leap 29% Yet They're Still Not Telling The Full Story

Champions Oncology, Inc. (NASDAQ:CSBR) shares have had a really impressive month, gaining 29% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 77%.

In spite of the firm bounce in price, Champions Oncology may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.1x, considering almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 7x aren't out of the ordinary. 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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See our latest analysis for Champions Oncology

How Champions Oncology Has Been Performing

With revenue growth that's superior to most other companies of late, Champions Oncology has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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 Champions Oncology.

How Is Champions Oncology's Revenue Growth Trending?

Champions Oncology's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. The latest three year period has also seen a 25% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 8.8% per annum as estimated by the lone analyst watching the company. That's shaping up to be similar to the 7.1% each year growth forecast for the broader industry.

In light of this, it's peculiar that Champions Oncology's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Champions Oncology's P/S?

Despite Champions Oncology's 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 seen that Champions Oncology currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Champions Oncology that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.