HOOKIPA Pharma Inc. (NASDAQ:HOOK) shares have had a horrible month, losing 25% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 33% share price drop.

Following the heavy fall in price, HOOKIPA Pharma may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11x and even P/S higher than 63x 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 limited.

What Does HOOKIPA Pharma's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, HOOKIPA Pharma has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on HOOKIPA Pharma will help you uncover what's on the horizon.

How Is HOOKIPA Pharma's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as HOOKIPA Pharma's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 235%. The strong recent performance means it was also able to grow revenue by 153% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should bring diminished returns, with revenue decreasing 27% per annum as estimated by the four analysts watching the company. With the industry predicted to deliver 202% growth each year, that's a disappointing outcome.

With this information, we are not surprised that HOOKIPA Pharma is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

HOOKIPA Pharma's P/S looks about as weak as its stock price lately. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that HOOKIPA Pharma's P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Plus, you should also learn about these 6 warning signs we've spotted with HOOKIPA Pharma (including 2 which are concerning).

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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