Subdued Growth No Barrier To Nurix Therapeutics, Inc.'s (NASDAQ:NRIX) Price

With a median price-to-sales (or "P/S") ratio of close to 10x in the Biotechs industry in the United States, you could be forgiven for feeling indifferent about Nurix Therapeutics, Inc.'s (NASDAQ:NRIX) P/S ratio of 8x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for Nurix Therapeutics

How Has Nurix Therapeutics Performed Recently?

With revenue growth that's inferior to most other companies of late, Nurix Therapeutics has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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How Is Nurix Therapeutics' Revenue Growth Trending?

Nurix Therapeutics' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 42% last year. The latest three year period has also seen an excellent 128% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 13% each year over the next three years. With the industry predicted to deliver 128% growth each year, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Nurix Therapeutics is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Nurix Therapeutics' P/S Mean For Investors?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

When you consider that Nurix Therapeutics' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Nurix Therapeutics (1 is a bit unpleasant) you should be aware of.

If these risks are making you reconsider your opinion on Nurix Therapeutics, 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.