ImmunoPrecise Antibodies Ltd.'s (NASDAQ:IPA) Shares Leap 28% Yet They're Still Not Telling The Full Story

ImmunoPrecise Antibodies Ltd. (NASDAQ:IPA) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. But the last month did very little to improve the 64% share price decline over the last year.

In spite of the firm bounce in price, ImmunoPrecise Antibodies may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.2x, since almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 2.6x and even P/S higher than 6x 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 limited.

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View our latest analysis for ImmunoPrecise Antibodies

What Does ImmunoPrecise Antibodies' P/S Mean For Shareholders?

There hasn't been much to differentiate ImmunoPrecise Antibodies' and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. Those who are bullish on ImmunoPrecise Antibodies will be hoping that this isn't the case.

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What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as ImmunoPrecise Antibodies' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Regardless, revenue has managed to lift by a handy 26% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next three years should generate growth of 21% per annum as estimated by the sole analyst watching the company. With the industry only predicted to deliver 6.9% per annum, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that ImmunoPrecise Antibodies' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On ImmunoPrecise Antibodies' P/S

The latest share price surge wasn't enough to lift ImmunoPrecise Antibodies' P/S close to the industry median. 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.

ImmunoPrecise Antibodies' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for ImmunoPrecise Antibodies (1 is significant) 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.