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

With a price-to-sales (or "P/S") ratio of 7.4x Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) may be sending bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 9.7x and even P/S higher than 52x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Ionis Pharmaceuticals

How Has Ionis Pharmaceuticals Performed Recently?

Ionis Pharmaceuticals hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially 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 Ionis Pharmaceuticals will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Ionis Pharmaceuticals?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Ionis Pharmaceuticals' to be considered reasonable.

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 10%. The last three years don't look nice either as the company has shrunk revenue by 13% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 20% each year as estimated by the analysts watching the company. With the industry predicted to deliver 141% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Ionis Pharmaceuticals' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Ionis Pharmaceuticals' P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of Ionis Pharmaceuticals' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with Ionis Pharmaceuticals.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.