Nektar Therapeutics (NASDAQ:NKTR) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The annual gain comes to 178% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, there still wouldn't be many who think Nektar Therapeutics' price-to-sales (or "P/S") ratio of 3x is worth a mention when it essentially matches the median P/S in the United States' Pharmaceuticals industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

How Has Nektar Therapeutics Performed Recently?

Recent times haven't been great for Nektar Therapeutics as its revenue has been rising slower than most other companies. 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.

Is There Some Revenue Growth Forecasted For Nektar Therapeutics?

In order to justify its P/S ratio, Nektar Therapeutics would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. This isn't what shareholders were looking for as it means they've been left with a 28% decline in revenue over the last three years in total. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the five analysts covering the company suggest revenue growth is heading into negative territory, declining 4.6% per annum over the next three years. With the industry predicted to deliver 20% growth per annum, that's a disappointing outcome.

With this in consideration, we think it doesn't make sense that Nektar Therapeutics' P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What We Can Learn From Nektar Therapeutics' P/S?

Nektar Therapeutics' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It appears that Nektar Therapeutics currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

It is also worth noting that we have found 3 warning signs for Nektar Therapeutics that you need to take into consideration.

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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