Revenues Tell The Story For Standard BioTools Inc. (NASDAQ:LAB) As Its Stock Soars 42%

Those holding Standard BioTools Inc. (NASDAQ:LAB) shares would be relieved that the share price has rebounded 42% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Since its price has surged higher, you could be forgiven for thinking Standard BioTools is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6.8x, considering almost half the companies in the United States' Life Sciences industry have P/S ratios below 3.6x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Standard BioTools

How Has Standard BioTools Performed Recently?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Standard BioTools has been doing quite well of late. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Standard BioTools will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Standard BioTools?

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

Retrospectively, the last year delivered an exceptional 31% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 12% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 31% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.1% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Standard BioTools' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Shares in Standard BioTools have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

As we suspected, our examination of Standard BioTools' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Standard BioTools (of which 1 makes us a bit uncomfortable!) you should know about.

If you're unsure about the strength of Standard BioTools' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com