MacroGenics, Inc.'s (NASDAQ:MGNX) 81% Dip In Price Shows Sentiment Is Matching Revenues

MacroGenics, Inc. (NASDAQ:MGNX) shareholders that were waiting for something to happen have been dealt a blow with a 81% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 49% in that time.

Since its price has dipped substantially, MacroGenics may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 4.8x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 12.5x and even P/S higher than 67x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for MacroGenics

What Does MacroGenics' Recent Performance Look Like?

MacroGenics hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

How Is MacroGenics' Revenue Growth Trending?

MacroGenics' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 74% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 60% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 37% per year over the next three years. That's shaping up to be materially lower than the 210% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why MacroGenics' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Having almost fallen off a cliff, MacroGenics' share price has pulled its P/S way down 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.

We've established that MacroGenics maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for MacroGenics (2 are a bit unpleasant!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.