Travere Therapeutics, Inc. (NASDAQ:TVTX) Surges 29% Yet Its Low P/S Is No Reason For Excitement

Travere Therapeutics, Inc. (NASDAQ:TVTX) shares have continued their recent momentum with a 29% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 95% in the last year.

In spite of the firm bounce in price, Travere Therapeutics may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 6.9x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.3x and even P/S higher than 86x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Travere Therapeutics

How Travere Therapeutics Has Been Performing

Travere Therapeutics could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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How Is Travere Therapeutics' Revenue Growth Trending?

In order to justify its P/S ratio, Travere Therapeutics would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 114%. The latest three year period has also seen an excellent 217% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 31% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 123% each year, which is noticeably more attractive.

With this in consideration, its clear as to why Travere Therapeutics' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Despite Travere Therapeutics' share price climbing recently, its P/S still lags most other companies. 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.

As we suspected, our examination of Travere Therapeutics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Travere Therapeutics that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.