Revenues Working Against REGENXBIO Inc.'s (NASDAQ:RGNX) Share Price

REGENXBIO Inc.'s (NASDAQ:RGNX) price-to-sales (or "P/S") ratio of 8.2x might make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 11.5x and even P/S above 63x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See 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.

Is There Any Revenue Growth Forecasted For REGENXBIO?

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 21% 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 44% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 54% each year during the coming three years according to the ten analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 193% each year, which is noticeably more attractive.

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.

The Bottom Line On REGENXBIO's P/S

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 expected, our analysis of REGENXBIO's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with REGENXBIO, and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on REGENXBIO, 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