Pacific Biosciences of California, Inc. (NASDAQ:PACB) Stock Rockets 56% But Many Are Still Ignoring The Company

Pacific Biosciences of California, Inc. (NASDAQ:PACB) shareholders have had their patience rewarded with a 56% share price jump in the last month. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 60% share price drop in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Pacific Biosciences of California's price-to-sales (or "P/S") ratio of 3.8x is worth a mention when the median P/S in the United States' Life Sciences industry is similar at about 4.1x. 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.

Check out our latest analysis for Pacific Biosciences of California

How Has Pacific Biosciences of California Performed Recently?

With revenue growth that's superior to most other companies of late, Pacific Biosciences of California has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pacific Biosciences of California.

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

In order to justify its P/S ratio, Pacific Biosciences of California would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. Pleasingly, revenue has also lifted 78% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 18% per annum during the coming three years according to the twelve analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.1% per annum, which is noticeably less attractive.

In light of this, it's curious that Pacific Biosciences of California's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Pacific Biosciences of California's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that Pacific Biosciences of California currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Pacific Biosciences of California (at least 1 which shouldn't be ignored), and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on Pacific Biosciences of California, 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.