Benign Growth For Fortress Biotech, Inc. (NASDAQ:FBIO) Underpins Its Share Price

Fortress Biotech, Inc.'s (NASDAQ:FBIO) price-to-sales (or "P/S") ratio of 0.6x might make it look like a strong buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 9.1x and even P/S above 55x 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.

Check out our latest analysis for Fortress Biotech

How Has Fortress Biotech Performed Recently?

With revenue growth that's inferior to most other companies of late, Fortress Biotech has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Fortress Biotech's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 32% gain to the company's top line. The latest three year period has also seen a 27% 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.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 35% per year over the next three years. That's shaping up to be materially lower than the 128% each year growth forecast for the broader industry.

In light of this, it's understandable that Fortress Biotech's 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.

The Bottom Line On Fortress Biotech's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Fortress Biotech's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

You should always think about risks. Case in point, we've spotted 5 warning signs for Fortress Biotech you should be aware of, and 3 of them don't sit too well with us.

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.