Some Confidence Is Lacking In Immunocore Holdings plc's (NASDAQ:IMCR) P/S

With a price-to-sales (or "P/S") ratio of 15.9x Immunocore Holdings plc (NASDAQ:IMCR) may be sending bearish signals at the moment, given that almost half of all Biotechs companies in the United States have P/S ratios under 11.5x and even P/S lower than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for Immunocore Holdings

How Immunocore Holdings Has Been Performing

With revenue growth that's superior to most other companies of late, Immunocore Holdings has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Immunocore Holdings.

How Is Immunocore Holdings' Revenue Growth Trending?

Immunocore Holdings' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% per year during the coming three years according to the eleven analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 109% each year, which is noticeably more attractive.

With this information, we find it concerning that Immunocore Holdings is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Key Takeaway

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.

It comes as a surprise to see Immunocore Holdings trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Immunocore Holdings you should know about.

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

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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.