Ginkgo Bioworks Holdings, Inc.'s (NYSE:DNA) Shares Climb 45% But Its Business Is Yet to Catch Up

Ginkgo Bioworks Holdings, Inc. (NYSE:DNA) shares have had a really impressive month, gaining 45% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 97%.

Even after such a large jump in price, there still wouldn't be many who think Ginkgo Bioworks Holdings' price-to-sales (or "P/S") ratio of 3.8x is worth a mention when the median P/S in the United States' Life Sciences industry is similar at about 3.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for Ginkgo Bioworks Holdings

How Has Ginkgo Bioworks Holdings Performed Recently?

Recent times have been advantageous for Ginkgo Bioworks 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Ginkgo Bioworks Holdings?

Ginkgo Bioworks Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. Still, revenue has fallen 57% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 18% as estimated by the four analysts watching the company. With the industry predicted to deliver 6.2% growth, that's a disappointing outcome.

With this in consideration, we think it doesn't make sense that Ginkgo Bioworks Holdings' P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Bottom Line On Ginkgo Bioworks Holdings' P/S

Ginkgo Bioworks Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

It appears that Ginkgo Bioworks Holdings currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Plus, you should also learn about these 3 warning signs we've spotted with Ginkgo Bioworks 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.