Investors Aren't Buying Mirum Pharmaceuticals, Inc.'s (NASDAQ:MIRM) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 7x Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) is a stock worth checking out, seeing as almost half of all the Biotechs companies in the United States have P/S ratios greater than 10.9x and even P/S higher than 58x 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 reduced P/S.

Check out our latest analysis for Mirum Pharmaceuticals

What Does Mirum Pharmaceuticals' P/S Mean For Shareholders?

Recent times haven't been great for Mirum Pharmaceuticals as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Mirum Pharmaceuticals.

How Is Mirum Pharmaceuticals' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Mirum Pharmaceuticals' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 112%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 30% each year as estimated by the ten analysts watching the company. With the industry predicted to deliver 118% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Mirum Pharmaceuticals' 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.

What We Can Learn From Mirum Pharmaceuticals' P/S?

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.

As we suspected, our examination of Mirum Pharmaceuticals' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Mirum Pharmaceuticals is showing 1 warning sign in our investment analysis, you should know about.

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.