REGENXBIO Inc. (NASDAQ:RGNX) Held Back By Insufficient Growth Even After Shares Climb 29%

REGENXBIO Inc. (NASDAQ:RGNX) shares have continued their recent momentum with a 29% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 32% in the last year.

In spite of the firm bounce in price, REGENXBIO may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 4x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.5x and even P/S higher than 89x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for REGENXBIO

What Does REGENXBIO's Recent Performance Look Like?

Recent times haven't been great for REGENXBIO as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is REGENXBIO's Revenue Growth Trending?

In order to justify its P/S ratio, REGENXBIO would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 75% gain to the company's top line. Still, revenue has fallen 68% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 38% each year during the coming three years according to the ten analysts following the company. With the industry predicted to deliver 126% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why REGENXBIO's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Shares in REGENXBIO have risen appreciably however, its P/S is still subdued. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that REGENXBIO maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

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

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.