Yahoo Finance Fewer Investors Than Expected Jumping On SomaLogic, Inc. (NASDAQ:SLGC)
With a median price-to-sales (or "P/S") ratio of close to 4.4x in the Life Sciences industry in the United States, you could be forgiven for feeling indifferent about SomaLogic, Inc.'s (NASDAQ:SLGC) P/S ratio of 5.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
Check out our latest analysis for SomaLogic
What Does SomaLogic's P/S Mean For Shareholders?
SomaLogic certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.
Keen to find out how analysts think SomaLogic's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Some Revenue Growth Forecasted For SomaLogic?
SomaLogic'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.
Taking a look back first, we see that the company grew revenue by an impressive 20% last year. Pleasingly, revenue has also lifted 203% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 11% per annum as estimated by the four analysts watching the company. With the industry only predicted to deliver 7.6% per year, the company is positioned for a stronger revenue result.
With this in consideration, we find it intriguing that SomaLogic's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Final Word
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.
Despite enticing revenue growth figures that outpace the industry, SomaLogic's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
We don't want to rain on the parade too much, but we did also find 1 warning sign for SomaLogic that you need to be mindful of.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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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