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Even With A 30% Surge, Cautious Investors Are Not Rewarding ImmunoPrecise Antibodies Ltd.'s (NASDAQ:IPA) Performance Completely

Simply Wall St · 01/17 10:44

ImmunoPrecise Antibodies Ltd. (NASDAQ:IPA) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 62% share price drop in the last twelve months.

Although its price has surged higher, ImmunoPrecise Antibodies may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.1x, considering almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 3.4x and even P/S higher than 7x 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.

See our latest analysis for ImmunoPrecise Antibodies

ps-multiple-vs-industry
NasdaqGM:IPA Price to Sales Ratio vs Industry January 17th 2025

How Has ImmunoPrecise Antibodies Performed Recently?

With revenue growth that's superior to most other companies of late, ImmunoPrecise Antibodies has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on ImmunoPrecise Antibodies.

Is There Any Revenue Growth Forecasted For ImmunoPrecise Antibodies?

ImmunoPrecise Antibodies' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.4% last year. The latest three year period has also seen a 29% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 18% per year as estimated by the dual analysts watching the company. With the industry only predicted to deliver 6.5% per year, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that ImmunoPrecise Antibodies' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does ImmunoPrecise Antibodies' P/S Mean For Investors?

ImmunoPrecise Antibodies' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

ImmunoPrecise Antibodies' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with ImmunoPrecise Antibodies (at least 1 which is concerning), and understanding them should be part of your investment process.

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.