Travere Therapeutics, Inc.'s (NASDAQ:TVTX) Shares Bounce 27% But Its Business Still Trails The Industry

Despite an already strong run, Travere Therapeutics, Inc. (NASDAQ:TVTX) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 164% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Travere Therapeutics' price-to-sales (or "P/S") ratio of 7.6x might still make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 12.7x and even P/S above 77x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Travere Therapeutics

How Has Travere Therapeutics Performed Recently?

Recent times haven't been great for Travere Therapeutics as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Travere Therapeutics' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 47% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 13% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 46% each year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 146% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Travere Therapeutics' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Travere Therapeutics' P/S

The latest share price surge wasn't enough to lift Travere Therapeutics' P/S close to the industry median. 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.

As expected, our analysis of Travere Therapeutics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Travere Therapeutics has 2 warning signs we think 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.