Lacklustre Performance Is Driving Ionis Pharmaceuticals, Inc.'s (NASDAQ:IONS) Low P/S

You may think that with a price-to-sales (or "P/S") ratio of 7.7x Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is a stock worth checking out, seeing as almost half of all the Biotechs companies in the United States have P/S ratios greater than 13.2x and even P/S higher than 66x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Ionis Pharmaceuticals

How Ionis Pharmaceuticals Has Been Performing

Recent times haven't been great for Ionis Pharmaceuticals as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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 Ionis Pharmaceuticals will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Ionis Pharmaceuticals would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 34% gain to the company's top line. As a result, it also grew revenue by 8.0% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 12% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 167% per annum, which is noticeably more attractive.

With this in consideration, its clear as to why Ionis Pharmaceuticals' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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.

As we suspected, our examination of Ionis Pharmaceuticals' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Ionis Pharmaceuticals that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.