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Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) Surges 28% Yet Its Low P/S Is No Reason For Excitement

Simply Wall St · 5d ago

Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 40% in the last twelve months.

Although its price has surged higher, Zentalis Pharmaceuticals may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 4.3x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.7x and even P/S higher than 82x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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View our latest analysis for Zentalis Pharmaceuticals

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NasdaqGM:ZNTL Price to Sales Ratio vs Industry January 7th 2026

What Does Zentalis Pharmaceuticals' P/S Mean For Shareholders?

Zentalis Pharmaceuticals hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

Retrospectively, the last year delivered a frustrating 34% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 15% per annum during the coming three years according to the seven analysts following the company. With the industry predicted to deliver 123% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Zentalis Pharmaceuticals' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Even after such a strong price move, Zentalis Pharmaceuticals' P/S still trails the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Zentalis Pharmaceuticals maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You always need to take note of risks, for example - Zentalis Pharmaceuticals has 3 warning signs we think you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.