Some Confidence Is Lacking In TG Therapeutics, Inc.'s (NASDAQ:TGTX) P/S

With a median price-to-sales (or "P/S") ratio of close to 12.6x in the Biotechs industry in the United States, you could be forgiven for feeling indifferent about TG Therapeutics, Inc.'s (NASDAQ:TGTX) P/S ratio, which comes in at about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for TG Therapeutics

How TG Therapeutics Has Been Performing

With revenue growth that's superior to most other companies of late, TG Therapeutics has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. 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 TG Therapeutics' future stacks up against the industry? In that case, our free report is a great place to start.

How Is TG Therapeutics' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like TG Therapeutics' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an explosive gain to the company's top line. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 48% per annum as estimated by the eight analysts watching the company. That's shaping up to be materially lower than the 240% per year growth forecast for the broader industry.

With this in mind, we find it intriguing that TG Therapeutics' P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look at the analysts forecasts of TG Therapeutics' revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

Plus, you should also learn about these 2 warning signs we've spotted with TG Therapeutics.

If these risks are making you reconsider your opinion on TG Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.