Opus Genetics, Inc.'s (NASDAQ:IRD) Price Is Right But Growth Is Lacking

Opus Genetics, Inc.'s (NASDAQ:IRD) price-to-sales (or "P/S") ratio of 4.9x might make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 8.7x and even P/S above 59x are quite common. 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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Check out our latest analysis for Opus Genetics

How Has Opus Genetics Performed Recently?

Opus Genetics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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.

Keen to find out how analysts think Opus Genetics' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 28%. In spite of this, the company still managed to deliver immense revenue growth over the last three years. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Looking ahead now, revenue is anticipated to climb by 15% per annum during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 105% per year, which is noticeably more attractive.

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

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 Opus Genetics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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 and we've discovered 3 warning signs for Opus Genetics (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

If you're unsure about the strength of Opus Genetics' 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.