Investors Appear Satisfied With Zevra Therapeutics, Inc.'s (NASDAQ:ZVRA) Prospects

You may think that with a price-to-sales (or "P/S") ratio of 13.7x Zevra Therapeutics, Inc. (NASDAQ:ZVRA) is a stock to avoid completely, seeing as almost half of all the Pharmaceuticals companies in the United States have P/S ratios under 2.9x and even P/S lower than 0.7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Zevra Therapeutics

How Has Zevra Therapeutics Performed Recently?

There hasn't been much to differentiate Zevra Therapeutics' and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Zevra Therapeutics?

In order to justify its P/S ratio, Zevra Therapeutics would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an exceptional 54% gain to the company's top line. The latest three year period has also seen an excellent 35% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 102% per annum as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 57% each year growth forecast for the broader industry.

With this information, we can see why Zevra Therapeutics is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

Our look into Zevra Therapeutics shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - Zevra Therapeutics has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.