Some Werewolf Therapeutics, Inc. (NASDAQ:HOWL) Shareholders Look For Exit As Shares Take 34% Pounding

Unfortunately for some shareholders, the Werewolf Therapeutics, Inc. (NASDAQ:HOWL) share price has dived 34% in the last thirty days, prolonging recent pain. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 19%.

In spite of the heavy fall in price, it's still not a stretch to say that Werewolf Therapeutics' price-to-sales (or "P/S") ratio of 10.7x right now seems quite "middle-of-the-road" compared to the Biotechs industry in the United States, where the median P/S ratio is around 11.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Werewolf Therapeutics

What Does Werewolf Therapeutics' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Werewolf Therapeutics' revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Werewolf Therapeutics' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Werewolf Therapeutics' is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 22%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 11% per year during the coming three years according to the five analysts following the company. Meanwhile, the broader industry is forecast to expand by 208% per annum, which paints a poor picture.

In light of this, it's somewhat alarming that Werewolf Therapeutics' P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Key Takeaway

Following Werewolf Therapeutics' share price tumble, its P/S is just clinging on to the industry median P/S. 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.

Our check of Werewolf Therapeutics' analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Werewolf Therapeutics (of which 1 makes us a bit uncomfortable!) you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.