Revenues Tell The Story For Alpha Teknova, Inc. (NASDAQ:TKNO) As Its Stock Soars 42%

Despite an already strong run, Alpha Teknova, Inc. (NASDAQ:TKNO) shares have been powering on, with a gain of 42% in the last thirty days. The last month tops off a massive increase of 209% in the last year.

After such a large jump in price, given around half the companies in the United States' Life Sciences industry have price-to-sales ratios (or "P/S") below 3.4x, you may consider Alpha Teknova as a stock to avoid entirely with its 9.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Alpha Teknova

How Alpha Teknova Has Been Performing

Recent times haven't been great for Alpha Teknova as its revenue has been falling quicker than most other companies. It might be that many expect the dismal revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Alpha Teknova?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 11%. The last three years don't look nice either as the company has shrunk revenue by 4.4% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 19% per year during the coming three years according to the five analysts following the company. That's shaping up to be materially higher than the 7.0% per annum growth forecast for the broader industry.

With this information, we can see why Alpha Teknova is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Alpha Teknova's P/S?

The strong share price surge has lead to Alpha Teknova's P/S soaring as well. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into Alpha Teknova shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Alpha Teknova (1 is a bit unpleasant!) that you should be aware of before investing here.

If you're unsure about the strength of Alpha Teknova's 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.