Revenues Tell The Story For Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) As Its Stock Soars 27%
Despite an already strong run, Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) shares have been powering on, with a gain of 27% in the last thirty days. The annual gain comes to 160% following the latest surge, making investors sit up and take notice.
Since its price has surged higher, Phathom Pharmaceuticals may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 8.7x, since almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios under 4.3x and even P/S lower than 1.5x are not unusual. 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 Phathom Pharmaceuticals
What Does Phathom Pharmaceuticals' Recent Performance Look Like?
Recent times have been advantageous for Phathom Pharmaceuticals as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.
Keen to find out how analysts think Phathom Pharmaceuticals' future stacks up against the industry? In that case, our free report is a great place to start.How Is Phathom Pharmaceuticals' Revenue Growth Trending?
Phathom Pharmaceuticals' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
Retrospectively, the last year delivered an explosive gain to the company's top line. Although, its longer-term performance hasn't been anywhere near as strong with three-year revenue growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.
Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 66% each year over the next three years. That's shaping up to be materially higher than the 29% per year growth forecast for the broader industry.
With this information, we can see why Phathom Pharmaceuticals is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
What Does Phathom Pharmaceuticals' P/S Mean For Investors?
The strong share price surge has lead to Phathom Pharmaceuticals' P/S soaring as well. 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 Phathom Pharmaceuticals' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
It is also worth noting that we have found 1 warning sign for Phathom Pharmaceuticals that you need to take into consideration.
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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