Revenues Tell The Story For Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) As Its Stock Soars 26%

Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 62%.

Since its price has surged higher, given around half the companies in the United States' Pharmaceuticals industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider Intra-Cellular Therapies as a stock to avoid entirely with its 15.5x P/S ratio. 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 Intra-Cellular Therapies

What Does Intra-Cellular Therapies' P/S Mean For Shareholders?

Intra-Cellular Therapies certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Intra-Cellular Therapies?

The only time you'd be truly comfortable seeing a P/S as steep as Intra-Cellular Therapies' is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 46% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 43% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 19% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Intra-Cellular Therapies' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The strong share price surge has lead to Intra-Cellular Therapies' P/S soaring as well. 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.

Our look into Intra-Cellular Therapies shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Intra-Cellular Therapies that 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.