The Market Doesn't Like What It Sees From REGENXBIO Inc.'s (NASDAQ:RGNX) Revenues Yet As Shares Tumble 27%

To the annoyance of some shareholders, REGENXBIO Inc. (NASDAQ:RGNX) shares are down a considerable 27% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 72% share price decline.

After such a large drop in price, REGENXBIO's price-to-sales (or "P/S") ratio of 3.5x 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 9x and even P/S above 49x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for REGENXBIO

How Has REGENXBIO Performed Recently?

REGENXBIO hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think REGENXBIO's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. This means it has also seen a slide in revenue over the longer-term as revenue is down 9.5% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the eleven analysts covering the company suggest revenue should grow by 55% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 128% per annum, 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 Key Takeaway

REGENXBIO's P/S looks about as weak as its stock price lately. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

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. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for REGENXBIO 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.