Little Excitement Around Arcus Biosciences, Inc.'s (NYSE:RCUS) Revenues As Shares Take 26% Pounding

Unfortunately for some shareholders, the Arcus Biosciences, Inc. (NYSE:RCUS) share price has dived 26% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 49% share price drop.

After such a large drop in price, Arcus Biosciences may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 4x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.1x and even P/S higher than 54x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Arcus Biosciences

What Does Arcus Biosciences' P/S Mean For Shareholders?

Arcus Biosciences could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of 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.

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

Is There Any Revenue Growth Forecasted For Arcus Biosciences?

The only time you'd be truly comfortable seeing a P/S as depressed as Arcus Biosciences' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an exceptional 121% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 33% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 0.7% per annum during the coming three years according to the ten analysts following the company. Meanwhile, the broader industry is forecast to expand by 125% each year, which paints a poor picture.

With this information, we are not surprised that Arcus Biosciences is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Arcus Biosciences' P/S Mean For Investors?

Shares in Arcus Biosciences have plummeted and its P/S has followed suit. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Arcus Biosciences' P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Plus, you should also learn about these 2 warning signs we've spotted with Arcus Biosciences.

If these risks are making you reconsider your opinion on Arcus Biosciences, 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.