The Market Doesn't Like What It Sees From Repare Therapeutics Inc.'s (NASDAQ:RPTX) Revenues Yet As Shares Tumble 26%

To the annoyance of some shareholders, Repare Therapeutics Inc. (NASDAQ:RPTX) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 80% loss during that time.

Following the heavy fall in price, Repare Therapeutics may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.2x and even P/S higher than 61x are not unusual. 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 Repare Therapeutics

How Repare Therapeutics Has Been Performing

Repare Therapeutics could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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.

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

Is There Any Revenue Growth Forecasted For Repare Therapeutics?

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

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 44% per year as estimated by the seven analysts watching the company. That's not great when the rest of the industry is expected to grow by 113% per annum.

With this in consideration, we find it intriguing that Repare Therapeutics' P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Repare Therapeutics' P/S

Shares in Repare Therapeutics have plummeted and its P/S has followed suit. 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.

It's clear to see that Repare Therapeutics maintains its low P/S on the weakness of its forecast for sliding revenue, 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.

Before you settle on your opinion, we've discovered 4 warning signs for Repare Therapeutics (2 make us uncomfortable!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.