There's No Escaping Sangamo Therapeutics, Inc.'s (NASDAQ:SGMO) Muted Revenues Despite A 28% Share Price Rise

Sangamo Therapeutics, Inc. (NASDAQ:SGMO) shares have continued their recent momentum with a 28% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 13% over that time.

Although its price has surged higher, Sangamo Therapeutics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2.6x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.3x and even P/S higher than 89x aren't out of the ordinary. 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.

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See our latest analysis for Sangamo Therapeutics

What Does Sangamo Therapeutics' P/S Mean For Shareholders?

Recent times have been advantageous for Sangamo Therapeutics as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Sangamo Therapeutics' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Sangamo Therapeutics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an explosive gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 28% overall. 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 27% per annum during the coming three years according to the five analysts following the company. That's shaping up to be materially lower than the 127% each year growth forecast for the broader industry.

With this in consideration, its clear as to why Sangamo Therapeutics' 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 Key Takeaway

Shares in Sangamo Therapeutics 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.

As we suspected, our examination of Sangamo Therapeutics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

Having said that, be aware Sangamo Therapeutics is showing 4 warning signs in our investment analysis, and 2 of those are potentially serious.

If you're unsure about the strength of Sangamo Therapeutics' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.