Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) May Have Run Too Fast Too Soon With Recent 25% Price Plummet

To the annoyance of some shareholders, Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) shares are down a considerable 25% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 29% in that time.

Even after such a large drop in price, Iovance Biotherapeutics may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 21.5x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios under 10.5x and even P/S lower than 3x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Iovance Biotherapeutics

How Iovance Biotherapeutics Has Been Performing

With revenue growth that's superior to most other companies of late, Iovance Biotherapeutics has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Iovance Biotherapeutics will help you uncover what's on the horizon.

How Is Iovance Biotherapeutics' Revenue Growth Trending?

In order to justify its P/S ratio, Iovance Biotherapeutics would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an explosive gain to the company's top line. Still, revenue has barely risen at all from three years ago in total, which is not ideal. 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 climb by 118% each year during the coming three years according to the analysts following the company. With the industry predicted to deliver 116% growth each year, the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Iovance Biotherapeutics' P/S is higher than its industry peers. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

The Bottom Line On Iovance Biotherapeutics' P/S

A significant share price dive has done very little to deflate Iovance Biotherapeutics' very lofty P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Analysts are forecasting Iovance Biotherapeutics' revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware Iovance Biotherapeutics is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Iovance Biotherapeutics' 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.