Subdued Growth No Barrier To Standard BioTools Inc. (NASDAQ:LAB) With Shares Advancing 26%

Standard BioTools Inc. (NASDAQ:LAB) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 21% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Standard BioTools' P/S ratio of 3.3x, since the median price-to-sales (or "P/S") ratio for the Life Sciences industry in the United States is also close to 3.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Standard BioTools

How Standard BioTools Has Been Performing

With revenue growth that's superior to most other companies of late, Standard BioTools has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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 Some Revenue Growth Forecasted For Standard BioTools?

The only time you'd be comfortable seeing a P/S like Standard BioTools' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 80% gain to the company's top line. Pleasingly, revenue has also lifted 55% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 21% per year over the next three years. That's not great when the rest of the industry is expected to grow by 6.6% per annum.

With this in consideration, we think it doesn't make sense that Standard BioTools' P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

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

Standard BioTools' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It appears that Standard BioTools currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

Before you settle on your opinion, we've discovered 1 warning sign for Standard BioTools 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.