Fortress Biotech, Inc.'s (NASDAQ:FBIO) Shares Bounce 36% But Its Business Still Trails The Industry

Those holding Fortress Biotech, Inc. (NASDAQ:FBIO) shares would be relieved that the share price has rebounded 36% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Taking a wider view, although not as strong as the last month, the full year gain of 19% is also fairly reasonable.

Even after such a large jump in price, Fortress Biotech may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 13.2x and even P/S higher than 77x 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.

See 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 you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is Fortress Biotech's Revenue Growth Trending?

Fortress Biotech's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered an exceptional 32% gain to the company's top line. Pleasingly, revenue has also lifted 57% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 31% per annum as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 145% each year, which is noticeably more attractive.

With this information, we can see why Fortress Biotech is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Fortress Biotech's P/S?

Fortress Biotech's recent share price jump still sees fails to bring its P/S alongside the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 6 warning signs for Fortress Biotech (3 don't sit too well with us) you should be aware of.

If you're unsure about the strength of Fortress Biotech'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.