Opus Genetics, Inc.'s (NASDAQ:IRD) Price Is Right But Growth Is Lacking After Shares Rocket 31%

Despite an already strong run, Opus Genetics, Inc. (NASDAQ:IRD) shares have been powering on, with a gain of 31% in the last thirty days. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Opus Genetics may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 5.7x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.4x and even P/S higher than 67x 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.

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See our latest analysis for Opus Genetics

What Does Opus Genetics' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Opus Genetics' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. 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 Opus Genetics will help you uncover what's on the horizon.

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

Opus Genetics' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.2%. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to the last 12 months. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 12% per year over the next three years. With the industry predicted to deliver 120% growth per annum, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Opus Genetics' 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 Final Word

Despite Opus Genetics' share price climbing recently, its P/S still lags most other companies. 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 expected, our analysis of Opus Genetics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 3 warning signs for Opus Genetics you should be aware of, and 1 of them can't be ignored.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.