The Market Doesn't Like What It Sees From HOOKIPA Pharma Inc.'s (NASDAQ:HOOK) Revenues Yet As Shares Tumble 26%

Unfortunately for some shareholders, the HOOKIPA Pharma Inc. (NASDAQ:HOOK) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 72% share price decline.

Following the heavy fall in price, HOOKIPA Pharma may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.7x and even P/S higher than 61x aren't out of the ordinary. 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

What Does HOOKIPA Pharma's P/S Mean For Shareholders?

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 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.

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.

Is There Any Revenue Growth Forecasted For HOOKIPA Pharma?

The only time you'd be truly comfortable seeing a P/S as depressed as HOOKIPA Pharma's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 143%. Pleasingly, revenue has also lifted 154% 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.

Looking ahead now, revenue is anticipated to slump, contracting by 46% per year during the coming three years according to the dual analysts following the company. That's not great when the rest of the industry is expected to grow by 114% per annum.

With this information, we are not surprised that HOOKIPA Pharma is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Key Takeaway

Shares in HOOKIPA Pharma have plummeted and its P/S has followed suit. 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.

It's clear to see that HOOKIPA Pharma maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

It is also worth noting that we have found 5 warning signs for HOOKIPA Pharma (2 don't sit too well with us!) that you need to take into consideration.

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.