Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) Might Not Be As Mispriced As It Looks After Plunging 86%

The Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) share price has fared very poorly over the last month, falling by a substantial 86%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 84% loss during that time.

After such a large drop in price, Marinus Pharmaceuticals' price-to-sales (or "P/S") ratio of 2.3x might make it look like a buy right now compared to the Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios above 2.9x and even P/S above 16x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Marinus Pharmaceuticals

What Does Marinus Pharmaceuticals' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Marinus Pharmaceuticals has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Marinus Pharmaceuticals' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 66% per annum over the next three years. That's shaping up to be materially higher than the 17% each year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Marinus Pharmaceuticals' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

The southerly movements of Marinus Pharmaceuticals' shares means its P/S is now sitting at a pretty low level. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Marinus Pharmaceuticals' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Marinus Pharmaceuticals (1 can't be ignored!) that we have uncovered.

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.