Stock Analysis

Lacklustre Performance Is Driving Dynavax Technologies Corporation's (NASDAQ:DVAX) Low P/S

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With a price-to-sales (or "P/S") ratio of 6.4x Dynavax Technologies Corporation (NASDAQ:DVAX) may be sending bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 12.2x and even P/S higher than 66x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Dynavax Technologies

NasdaqGS:DVAX Price to Sales Ratio vs Industry May 22nd 2024

What Does Dynavax Technologies' Recent Performance Look Like?

Dynavax Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Dynavax Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Dynavax Technologies?

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

Retrospectively, the last year delivered a frustrating 64% decrease to the company's top line. Still, the latest three year period has seen an excellent 110% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 23% per year over the next three years. With the industry predicted to deliver 211% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Dynavax Technologies' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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.

As we suspected, our examination of Dynavax Technologies' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 1 warning sign for Dynavax Technologies that we have uncovered.

If you're unsure about the strength of Dynavax Technologies' 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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Find out whether Dynavax Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.