Little Excitement Around Poseida Therapeutics, Inc.'s (NASDAQ:PSTX) Revenues As Shares Take 44% Pounding

To the annoyance of some shareholders, Poseida Therapeutics, Inc. (NASDAQ:PSTX) shares are down a considerable 44% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 38% in that time.

Following the heavy fall in price, Poseida Therapeutics' price-to-sales (or "P/S") ratio of 1.5x might make it look like a strong buy right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios above 11.5x and even P/S above 50x are quite common. 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.

See our latest analysis for Poseida Therapeutics

What Does Poseida Therapeutics' Recent Performance Look Like?

Poseida Therapeutics certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on Poseida Therapeutics will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Poseida Therapeutics?

Poseida Therapeutics' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Although, its longer-term performance hasn't been anywhere near as strong with three-year revenue growth being relatively non-existent overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the six analysts covering the company suggest revenue growth is heading into negative territory, declining 47% each year over the next three years. That's not great when the rest of the industry is expected to grow by 92% per year.

With this information, we are not surprised that Poseida Therapeutics is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Bottom Line On Poseida Therapeutics' P/S

Having almost fallen off a cliff, Poseida Therapeutics' share price has pulled its P/S way down as well. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Poseida Therapeutics' P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 4 warning signs for Poseida Therapeutics (1 makes us a bit uncomfortable!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.