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- NasdaqGM:XNCR
Xencor, Inc.'s (NASDAQ:XNCR) Price Is Right But Growth Is Lacking
With a price-to-sales (or "P/S") ratio of 4.4x Xencor, Inc. (NASDAQ:XNCR) may be sending bullish signals at the moment, given that almost half of all the Biotechs companies in the United States have P/S ratios greater than 8.5x and even P/S higher than 54x 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 limited.
View our latest analysis for Xencor
How Has Xencor Performed Recently?
Xencor could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Xencor.Do Revenue Forecasts Match The Low P/S Ratio?
There's an inherent assumption that a company should underperform the industry for P/S ratios like Xencor's to be considered reasonable.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 26%. The last three years don't look nice either as the company has shrunk revenue by 61% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Turning to the outlook, the next three years should generate growth of 15% per year as estimated by the eleven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 89% per year, which is noticeably more attractive.
With this in consideration, its clear as to why Xencor's 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 Bottom Line On Xencor's P/S
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
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.
And what about other risks? Every company has them, and we've spotted 2 warning signs for Xencor you should know about.
If these risks are making you reconsider your opinion on Xencor, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.
About NasdaqGM:XNCR
Xencor
A clinical-stage biopharmaceutical company, focuses on the discovery and development of engineered monoclonal antibodies for the treatment of asthma and allergic diseases, autoimmune diseases, and cancer.
Good value with adequate balance sheet.
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