The Market Doesn't Like What It Sees From Pieris Pharmaceuticals, Inc.'s (NASDAQ:PIRS) Revenues Yet As Shares Tumble 30%

Unfortunately for some shareholders, the Pieris Pharmaceuticals, Inc. (NASDAQ:PIRS) share price has dived 30% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 56% share price decline.

Following the heavy fall in price, Pieris Pharmaceuticals may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.1x and even P/S higher than 59x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Pieris Pharmaceuticals

How Pieris Pharmaceuticals Has Been Performing

Recent times have been quite advantageous for Pieris Pharmaceuticals as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. 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.

Although there are no analyst estimates available for Pieris Pharmaceuticals, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Pieris Pharmaceuticals?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Pieris Pharmaceuticals' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 143% gain to the company's top line. Revenue has also lifted 29% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 282% shows it's noticeably less attractive.

In light of this, it's understandable that Pieris Pharmaceuticals' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

Pieris Pharmaceuticals' P/S looks about as weak as its stock price lately. 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 Pieris Pharmaceuticals revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Pieris Pharmaceuticals (2 are potentially serious!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Pieris 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com