There's No Escaping Xencor, Inc.'s (NASDAQ:XNCR) Muted Revenues Despite A 29% Share Price Rise

Despite an already strong run, Xencor, Inc. (NASDAQ:XNCR) shares have been powering on, with a gain of 29% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Even after such a large jump in price, Xencor may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 10.8x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 15.4x and even P/S higher than 71x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Xencor

What Does Xencor's P/S Mean For Shareholders?

Xencor hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Xencor?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 51%. Even so, admirably revenue has lifted 72% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 22% per year during the coming three years according to the nine analysts following the company. With the industry predicted to deliver 296% growth per annum, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Xencor's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Xencor's P/S

The latest share price surge wasn't enough to lift Xencor's P/S close to the industry median. 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 expected, our analysis of Xencor's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. 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 Xencor 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.