HOOKIPA Pharma Inc. (NASDAQ:HOOK) Shares Fly 25% But Investors Aren't Buying For Growth

HOOKIPA Pharma Inc. (NASDAQ:HOOK) shares have continued their recent momentum with a 25% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 11% over that time.

Even after such a large jump in price, HOOKIPA Pharma's price-to-sales (or "P/S") ratio of 4.4x might still make it look like a strong buy right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios above 13x and even P/S above 59x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for HOOKIPA Pharma

How Has HOOKIPA Pharma Performed Recently?

Recent times haven't been great for HOOKIPA Pharma as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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 HOOKIPA Pharma will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

HOOKIPA Pharma'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 41% gain to the company's top line. Although, its longer-term performance hasn't been as strong with three-year revenue growth being relatively non-existent overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 34% per year during the coming three years according to the four analysts following the company. Meanwhile, the broader industry is forecast to expand by 163% per year, which paints a poor picture.

With this in consideration, we find it intriguing that HOOKIPA Pharma's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

Even after such a strong price move, HOOKIPA Pharma's P/S still trails the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of HOOKIPA Pharma's analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, HOOKIPA Pharma's poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 4 warning signs for HOOKIPA Pharma you should be aware of, and 1 of them is a bit unpleasant.

If you're unsure about the strength of HOOKIPA Pharma'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.