Sentiment Still Eluding Champions Oncology, Inc. (NASDAQ:CSBR)

Champions Oncology, Inc.'s (NASDAQ:CSBR) price-to-sales (or "P/S") ratio of 1.3x might make it look like a strong buy right now compared to the Life Sciences industry in the United States, where around half of the companies have P/S ratios above 3.4x and even P/S above 7x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Champions Oncology

What Does Champions Oncology's Recent Performance Look Like?

Champions Oncology hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still 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.

Want the full picture on analyst estimates for the company? Then our free report on Champions Oncology will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Champions Oncology?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.0%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 21% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 9.0% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.0% each year, which is noticeably less attractive.

In light of this, it's peculiar that Champions Oncology's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

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.

To us, it seems Champions Oncology currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 3 warning signs we've spotted with Champions Oncology.

If you're unsure about the strength of Champions Oncology's 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.