Yahoo Finance There's No Escaping Paratek Pharmaceuticals, Inc.'s (NASDAQ:PRTK) Muted Revenues Despite A 77% Share Price Rise
Paratek Pharmaceuticals, Inc. (NASDAQ:PRTK) shareholders would be excited to see that the share price has had a great month, posting a 77% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.
In spite of the firm bounce in price, Paratek Pharmaceuticals may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1x, 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 15x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
View our latest analysis for Paratek Pharmaceuticals
What Does Paratek Pharmaceuticals' P/S Mean For Shareholders?
Paratek Pharmaceuticals certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic 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 Paratek Pharmaceuticals.
Is There Any Revenue Growth Forecasted For Paratek Pharmaceuticals?
In order to justify its P/S ratio, Paratek 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 23%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Looking ahead now, revenue is anticipated to climb by 16% per year during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 31% per annum growth forecast for the broader industry.
With this in consideration, its clear as to why Paratek Pharmaceuticals' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
What Does Paratek Pharmaceuticals' P/S Mean For Investors?
Even after such a strong price move, Paratek Pharmaceuticals' P/S still trails the rest of the industry. 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 Paratek 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. The company will need a change of fortune to justify the P/S rising higher in the future.
You should always think about risks. Case in point, we've spotted 4 warning signs for Paratek Pharmaceuticals you should be aware of, and 3 of them are a bit unpleasant.
If these risks are making you reconsider your opinion on Paratek Pharmaceuticals, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
