Codexis, Inc. (NASDAQ:CDXS) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. 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.

Even after such a large jump in price, Codexis may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.9x, considering almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 3.3x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Codexis

How Has Codexis Performed Recently?

Codexis has been struggling lately as its revenue has declined faster than most other companies. The P/S ratio is probably low because investors think this poor revenue performance isn't going to improve at all. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Codexis?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 44%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 11% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next three years should generate growth of 7.0% each year as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.9% each year, which is noticeably less attractive.

With this information, we find it odd that Codexis is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

The latest share price surge wasn't enough to lift Codexis' P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A look at Codexis' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. 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.

Before you settle on your opinion, we've discovered 3 warning signs for Codexis that you should be aware of.

If you're unsure about the strength of Codexis' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.