Standard BioTools Inc.'s (NASDAQ:LAB) P/S Still Appears To Be Reasonable

Standard BioTools Inc.'s (NASDAQ:LAB) price-to-sales (or "P/S") ratio of 7.1x may look like a poor investment opportunity when you consider close to half the companies in the Life Sciences industry in the United States have P/S ratios below 3.8x. 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.

See our latest analysis for Standard BioTools

What Does Standard BioTools' P/S Mean For Shareholders?

With only a limited decrease in revenue compared to most other companies of late, Standard BioTools has been doing relatively well. Perhaps the market is expecting the company to continue to outperform the industry, which has propped up the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price, especially if revenue continues to dissolve.

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

How Is Standard BioTools' Revenue Growth Trending?

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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.7%. As a result, revenue from three years ago have also fallen 17% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 17% per year during the coming three years according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.5% per year, which is noticeably less attractive.

With this information, we can see why Standard BioTools is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Standard BioTools' P/S?

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.

Our look into Standard BioTools shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 2 warning signs for Standard BioTools you should be aware of, and 1 of them is a bit unpleasant.

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.