Tango Therapeutics, Inc. (NASDAQ:TNGX) Not Doing Enough For Some Investors As Its Shares Slump 30%

To the annoyance of some shareholders, Tango Therapeutics, Inc. (NASDAQ:TNGX) shares are down a considerable 30% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 80% share price decline.

After such a large drop in price, Tango Therapeutics may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.6x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.8x and even P/S higher than 50x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Tango Therapeutics

How Tango Therapeutics Has Been Performing

With revenue growth that's inferior to most other companies of late, Tango Therapeutics has been relatively sluggish. 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.

Want the full picture on analyst estimates for the company? Then our free report on Tango Therapeutics will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Tango Therapeutics?

Tango Therapeutics' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 15%. Revenue has also lifted 14% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 16% each year during the coming three years according to the nine analysts following the company. That's not great when the rest of the industry is expected to grow by 130% each year.

In light of this, it's understandable that Tango Therapeutics' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Key Takeaway

Tango Therapeutics' P/S has taken a dip along with its share price. 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.

As we suspected, our examination of Tango Therapeutics' analyst forecasts revealed that its outlook for shrinking revenue 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Tango Therapeutics.

If these risks are making you reconsider your opinion on Tango 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.