Myriad Genetics, Inc.'s (NASDAQ:MYGN) Price Is Right But Growth Is Lacking

You may think that with a price-to-sales (or "P/S") ratio of 3.2x Myriad Genetics, Inc. (NASDAQ:MYGN) is definitely a stock worth checking out, seeing as almost half of all the Biotechs companies in the United States have P/S ratios greater than 12.3x and even P/S above 73x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Myriad Genetics

How Has Myriad Genetics Performed Recently?

With revenue growth that's inferior to most other companies of late, Myriad Genetics has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Myriad Genetics would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a decent 15% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 21% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 10% each year as estimated by the analysts watching the company. That's shaping up to be materially lower than the 138% per annum growth forecast for the broader industry.

With this information, we can see why Myriad Genetics is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Myriad Genetics' P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Myriad Genetics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Myriad Genetics that you should be aware of.

If these risks are making you reconsider your opinion on Myriad Genetics, 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.