The Market Doesn't Like What It Sees From Telix Pharmaceuticals Limited's (ASX:TLX) Revenues Yet As Shares Tumble 26%
The Telix Pharmaceuticals Limited (ASX:TLX) share price has fared very poorly over the last month, falling by a substantial 26%. For any long-term shareholders, the last month ends a year to forget by locking in a 54% share price decline.
Even after such a large drop in price, Telix Pharmaceuticals may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.8x, since almost half of all companies in the Biotechs industry in Australia have P/S ratios greater than 13.9x and even P/S higher than 46x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Telix Pharmaceuticals
What Does Telix Pharmaceuticals' Recent Performance Look Like?
With revenue growth that's superior to most other companies of late, Telix Pharmaceuticals has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Keen to find out how analysts think Telix Pharmaceuticals' 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?
In order to justify its P/S ratio, Telix Pharmaceuticals would need to produce anemic growth that's substantially trailing the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 55%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.
Looking ahead now, revenue is anticipated to climb by 23% each year during the coming three years according to the analysts following the company. With the industry predicted to deliver 33% growth per year, the company is positioned for a weaker revenue result.
In light of this, it's understandable that Telix Pharmaceuticals' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
What We Can Learn From Telix Pharmaceuticals' P/S?
Telix Pharmaceuticals' P/S looks about as weak as its stock price lately. 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 we suspected, our examination of Telix Pharmaceuticals' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Telix Pharmaceuticals (1 can't be ignored!) that you should be aware of before investing here.
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.