You may think that with a price-to-sales (or "P/S") ratio of 4x BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is definitely a stock worth checking out, seeing as almost half of all the Biotechs companies in the United States have P/S ratios greater than 12x and even P/S above 71x 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.

How Has BioCryst Pharmaceuticals Performed Recently?

With revenue growth that's inferior to most other companies of late, BioCryst Pharmaceuticals has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is BioCryst Pharmaceuticals' Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like BioCryst Pharmaceuticals' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 19% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 147% per annum, which is noticeably more attractive.

With this in consideration, its clear as to why BioCryst 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.

The Bottom Line On BioCryst Pharmaceuticals' P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of BioCryst Pharmaceuticals' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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.

There are also other vital risk factors to consider and we've discovered 2 warning signs for BioCryst Pharmaceuticals (1 doesn't sit too well with us!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on BioCryst Pharmaceuticals, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.