Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) Shares Fly 46% But Investors Aren't Buying For Growth

Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM) shares have continued their recent momentum with a 46% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 50% in the last year.

Although its price has surged higher, Mirum Pharmaceuticals may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 8.3x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.5x and even P/S higher than 64x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Mirum Pharmaceuticals

What Does Mirum Pharmaceuticals' Recent Performance Look Like?

Recent times have been advantageous for Mirum Pharmaceuticals as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially 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?

In order to justify its P/S ratio, Mirum Pharmaceuticals would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 134% gain to the company's top line. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 35% per year during the coming three years according to the ten analysts following the company. With the industry predicted to deliver 207% growth per annum, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Mirum Pharmaceuticals' 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

Mirum Pharmaceuticals' stock price has surged recently, but its but its P/S still remains modest. 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. 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Mirum Pharmaceuticals you should know about.

If these risks are making you reconsider your opinion on Mirum Pharmaceuticals, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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