Little Excitement Around G1 Therapeutics, Inc.'s (NASDAQ:GTHX) Revenues

With a price-to-sales (or "P/S") ratio of 2.6x G1 Therapeutics, Inc. (NASDAQ:GTHX) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 13.1x and even P/S higher than 61x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for G1 Therapeutics

What Does G1 Therapeutics' P/S Mean For Shareholders?

G1 Therapeutics certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on G1 Therapeutics will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For G1 Therapeutics?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like G1 Therapeutics' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 137%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 69% per annum over the next three years. With the industry predicted to deliver 102% growth per annum, the company is positioned for a weaker revenue result.

With this information, we can see why G1 Therapeutics 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 G1 Therapeutics' P/S?

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.

We've established that G1 Therapeutics maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - G1 Therapeutics has 3 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on G1 Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.