CureVac N.V. (NASDAQ:CVAC) shareholders would be excited to see that the share price has had a great month, posting a 47% 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 60% share price drop in the last twelve months.  

Although its price has surged higher, there still wouldn't be many who think CureVac's price-to-sales (or "P/S") ratio of 12.9x is worth a mention when the median P/S in the United States' Biotechs industry is similar at about 11.8x.  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.    

NasdaqGM:CVAC Price to Sales Ratio vs Industry May 25th 2024

What Does CureVac's P/S Mean For Shareholders?

CureVac could be doing better as it's been growing revenue less than most other companies lately.   It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling.  If not, then existing shareholders may be a little nervous about the viability of the share price.    

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

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

There's an inherent assumption that a company should be matching the industry for P/S ratios like CureVac's to be considered reasonable.  

If we review the last year of revenue growth, the company posted a terrific increase of 18%.   Revenue has also lifted 5.8% in aggregate from three years ago, mostly thanks to the last 12 months of growth.  So we can start by confirming that the company has actually done a good job of growing revenue over that time.  

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 37% per annum over the next three years.  Meanwhile, the rest of the industry is forecast to expand by 208% per year, which is noticeably more attractive.

With this in mind, we find it intriguing that CureVac's P/S is closely matching its industry peers.  Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now.  These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.  

The Key Takeaway

CureVac appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry      Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

When you consider that CureVac'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.  At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long.  This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.    

We don't want to rain on the parade too much, but we did also find 3 warning signs for CureVac (1 is potentially serious!) that you need to be mindful 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.

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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.