2seventy bio, Inc. (NASDAQ:TSVT) Shares Fly 44% But Investors Aren't Buying For Growth

Those holding 2seventy bio, Inc. (NASDAQ:TSVT) shares would be relieved that the share price has rebounded 44% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 74% share price drop in the last twelve months.

Even after such a large jump in price, 2seventy bio may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.1x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.9x and even P/S higher than 49x aren't out of the ordinary. 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.

Check out our latest analysis for 2seventy bio

How 2seventy bio Has Been Performing

Recent times have been advantageous for 2seventy bio as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 2seventy bio's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For 2seventy bio?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like 2seventy bio's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 184% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 41% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 13% per annum over the next three years. That's not great when the rest of the industry is expected to grow by 216% per annum.

With this information, we are not surprised that 2seventy bio is trading at a P/S lower than the industry. 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.

What Does 2seventy bio's P/S Mean For Investors?

Shares in 2seventy bio have risen appreciably however, its P/S is still subdued. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that 2seventy bio's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, 2seventy bio's 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.

Before you settle on your opinion, we've discovered 3 warning signs for 2seventy bio (1 shouldn't be ignored!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.