ProQR Therapeutics N.V.'s (NASDAQ:PRQR) 29% Share Price Plunge Could Signal Some Risk

ProQR Therapeutics N.V. (NASDAQ:PRQR) shareholders won't be pleased to see that the share price has had a very rough month, dropping 29% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 42% in that time.

Although its price has dipped substantially, it's still not a stretch to say that ProQR Therapeutics' price-to-sales (or "P/S") ratio of 11.7x right now seems quite "middle-of-the-road" compared to the Biotechs industry in the United States, where the median P/S ratio is around 11.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for ProQR Therapeutics

What Does ProQR Therapeutics' Recent Performance Look Like?

While the industry has experienced revenue growth lately, ProQR Therapeutics' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

The only time you'd be comfortable seeing a P/S like ProQR Therapeutics' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Turning to the outlook, the next three years should generate growth of 54% each year as estimated by the six analysts watching the company. That's shaping up to be materially lower than the 124% each year growth forecast for the broader industry.

In light of this, it's curious that ProQR Therapeutics' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On ProQR Therapeutics' P/S

With its share price dropping off a cliff, the P/S for ProQR Therapeutics looks to be in line with the rest of the Biotechs industry. 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.

Our look at the analysts forecasts of ProQR Therapeutics' revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with ProQR Therapeutics, and understanding should be part of your investment process.

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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.