Sarepta Therapeutics, Inc.'s (NASDAQ:SRPT) Low P/S No Reason For Excitement

Sarepta Therapeutics, Inc.'s (NASDAQ:SRPT) price-to-sales (or "P/S") ratio of 5.2x 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 9x and even P/S above 52x 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.

Check out our latest analysis for Sarepta Therapeutics

How Has Sarepta Therapeutics Performed Recently?

With revenue growth that's inferior to most other companies of late, Sarepta Therapeutics has been relatively sluggish. 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 Sarepta Therapeutics' future stacks up against the industry? In that case, our free report is a great place to start.

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 Sarepta Therapeutics' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 53% last year. The strong recent performance means it was also able to grow revenue by 171% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 32% each year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 124% per year growth forecast for the broader industry.

With this in consideration, its clear as to why Sarepta Therapeutics' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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 Sarepta Therapeutics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Sarepta Therapeutics 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.

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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.