WEBULL

There's Reason For Concern Over Legend Biotech Corporation's (NASDAQ:LEGN) Massive 32% Price Jump

Simply Wall St · 06/14 12:26

Those holding Legend Biotech Corporation (NASDAQ:LEGN) shares would be relieved that the share price has rebounded 32% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 13% over that time.

Although its price has surged higher, it's still not a stretch to say that Legend Biotech's price-to-sales (or "P/S") ratio of 9.3x right now seems quite "middle-of-the-road" compared to the Biotechs industry in the United States, where the median P/S ratio is around 8.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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View our latest analysis for Legend Biotech

ps-multiple-vs-industry
NasdaqGS:LEGN Price to Sales Ratio vs Industry June 14th 2025

What Does Legend Biotech's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Legend Biotech has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

Legend Biotech's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 112% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 45% per year as estimated by the analysts watching the company. With the industry predicted to deliver 113% growth per annum, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Legend Biotech's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From Legend Biotech's P/S?

Legend Biotech's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

When you consider that Legend Biotech's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Legend Biotech with six simple checks on some of these key factors.

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.