REGENXBIO Inc. (NASDAQ:RGNX) Shares Fly 34% But Investors Aren't Buying For Growth

REGENXBIO Inc. (NASDAQ:RGNX) shareholders would be excited to see that the share price has had a great month, posting a 34% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 41% in the last twelve months.

Even after such a large jump in price, REGENXBIO may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 5.8x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.6x and even P/S higher than 48x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for REGENXBIO

What Does REGENXBIO's P/S Mean For Shareholders?

REGENXBIO could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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.

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

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

Retrospectively, the last year delivered a frustrating 7.7% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 82% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 52% per year during the coming three years according to the eleven analysts following the company. That's shaping up to be materially lower than the 175% per annum growth forecast for the broader industry.

With this information, we can see why REGENXBIO is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does REGENXBIO's P/S Mean For Investors?

REGENXBIO's stock price has surged recently, but its but its P/S still remains modest. 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 REGENXBIO maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. 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 2 warning signs with REGENXBIO, and understanding these should be part of your investment process.

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.