Sarepta Therapeutics, Inc.'s (NASDAQ:SRPT) Shares Bounce 32% But Its Business Still Trails The Industry

Despite an already strong run, Sarepta Therapeutics, Inc. (NASDAQ:SRPT) shares have been powering on, with a gain of 32% in the last thirty days. But the last month did very little to improve the 82% share price decline over the last year.

Even after such a large jump in price, Sarepta Therapeutics' price-to-sales (or "P/S") ratio of 0.9x might still 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 11.3x and even P/S above 91x are quite common. 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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Check out our latest analysis for Sarepta Therapeutics

What Does Sarepta Therapeutics' Recent Performance Look Like?

Recent times haven't been great for Sarepta Therapeutics as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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.

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Do Revenue Forecasts Match The Low P/S Ratio?

Sarepta Therapeutics' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered an exceptional 65% gain to the company's top line. Pleasingly, revenue has also lifted 197% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue growth is heading into negative territory, declining 16% per year over the next three years. Meanwhile, the broader industry is forecast to expand by 129% per annum, which paints a poor picture.

In light of this, it's understandable that Sarepta Therapeutics' P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Sarepta Therapeutics' P/S?

Sarepta Therapeutics' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

It's clear to see that Sarepta Therapeutics maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Sarepta Therapeutics' poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for Sarepta Therapeutics that you need to take into consideration.

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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.