Risks Still Elevated At These Prices As Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) Shares Dive 35%

Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) shares have had a horrible month, losing 35% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 81%, which is great even in a bull market.

Although its price has dipped substantially, there still wouldn't be many who think Xeris Biopharma Holdings' price-to-sales (or "P/S") ratio of 4x is worth a mention when it essentially matches the median P/S in the United States' Pharmaceuticals industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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Check out our latest analysis for Xeris Biopharma Holdings

How Xeris Biopharma Holdings Has Been Performing

Recent times have been advantageous for Xeris Biopharma Holdings as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Xeris Biopharma Holdings.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Xeris Biopharma Holdings' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 42% last year. The latest three year period has also seen an excellent 170% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 22% each year during the coming three years according to the six analysts following the company. That's shaping up to be materially lower than the 29% per annum growth forecast for the broader industry.

With this information, we find it interesting that Xeris Biopharma Holdings is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On Xeris Biopharma Holdings' P/S

With its share price dropping off a cliff, the P/S for Xeris Biopharma Holdings looks to be in line with the rest of the Pharmaceuticals industry. 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.

When you consider that Xeris Biopharma Holdings' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Plus, you should also learn about this 1 warning sign we've spotted with Xeris Biopharma Holdings.

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.