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

Invivyd, Inc. (NASDAQ:IVVD) shares have continued their recent momentum with a 31% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 89%.

In spite of the firm bounce in price, Invivyd's price-to-sales (or "P/S") ratio of 7.9x might still 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 10.3x and even P/S above 88x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Invivyd

What Does Invivyd's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Invivyd has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is Invivyd's Revenue Growth Trending?

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

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Although, its longer-term performance hasn't been anywhere near as strong with three-year revenue growth being relatively non-existent overall. 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 80% per annum as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 128% per annum growth forecast for the broader industry.

In light of this, it's understandable that Invivyd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Despite Invivyd's 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.

We've established that Invivyd maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

You should always think about risks. Case in point, we've spotted 3 warning signs for Invivyd you should be aware of, and 2 of them don't sit too well with us.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.