There's No Escaping Teva Pharmaceutical Industries Limited's (NYSE:TEVA) Muted Revenues Despite A 27% Share Price Rise

Teva Pharmaceutical Industries Limited (NYSE:TEVA) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 85% in the last year.

Even after such a large jump in price, Teva Pharmaceutical Industries may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.4x, considering almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios greater than 3.1x and even P/S higher than 13x 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 limited.

See our latest analysis for Teva Pharmaceutical Industries

How Has Teva Pharmaceutical Industries Performed Recently?

Teva Pharmaceutical Industries 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.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Teva Pharmaceutical Industries' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 9.8% gain to the company's revenues. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 2.0% per annum during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 22% each year, which is noticeably more attractive.

With this information, we can see why Teva Pharmaceutical Industries is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

Teva Pharmaceutical Industries' stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Teva Pharmaceutical Industries' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Teva Pharmaceutical Industries with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Teva Pharmaceutical Industries' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.