Yahoo Finance Market Participants Recognise Oxford Nanopore Technologies plc's (LON:ONT) Revenues
Oxford Nanopore Technologies plc's (LON:ONT) price-to-sales (or "P/S") ratio of 9.5x may look like a poor investment opportunity when you consider close to half the companies in the Life Sciences industry in the United Kingdom have P/S ratios below 4x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.
View our latest analysis for Oxford Nanopore Technologies
How Has Oxford Nanopore Technologies Performed Recently?
Oxford Nanopore Technologies certainly has been doing a good job lately as it's been growing revenue more 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.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Oxford Nanopore Technologies.
Do Revenue Forecasts Match The High P/S Ratio?
In order to justify its P/S ratio, Oxford Nanopore Technologies would need to produce outstanding growth that's well in excess of the industry.
Retrospectively, the last year delivered an exceptional 49% gain to the company's top line. The latest three year period has also seen an excellent 281% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 14% each year during the coming three years according to the nine analysts following the company. With the industry only predicted to deliver 11% per annum, the company is positioned for a stronger revenue result.
With this information, we can see why Oxford Nanopore Technologies 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 We Can Learn From Oxford Nanopore Technologies' P/S?
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.
As we suspected, our examination of Oxford Nanopore Technologies' 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 these conditions change, they will continue to provide strong support to the share price.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Oxford Nanopore Technologies that you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
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