Lacklustre Performance Is Driving Voyager Therapeutics, Inc.'s (NASDAQ:VYGR) Low P/S

With a price-to-sales (or "P/S") ratio of 2.7x Voyager Therapeutics, Inc. (NASDAQ:VYGR) may be sending very bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 11.1x and even P/S higher than 61x 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 so limited.

Check out our latest analysis for Voyager Therapeutics

How Voyager Therapeutics Has Been Performing

While the industry has experienced revenue growth lately, Voyager Therapeutics' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 8.7% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue growth is heading into negative territory, declining 26% each year over the next three years. Meanwhile, the broader industry is forecast to expand by 111% per annum, which paints a poor picture.

With this in consideration, we find it intriguing that Voyager Therapeutics' P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Key Takeaway

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 Voyager Therapeutics' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Voyager Therapeutics has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.