Despite an already strong run, Xeris Biopharma Holdings, Inc. (NASDAQ:XERS) shares have been powering on, with a gain of 32% in the last thirty days. The last month tops off a massive increase of 141% in the last year.

Although its price has surged higher, Xeris Biopharma Holdings' price-to-sales (or "P/S") ratio of 2.3x might still make it look like a buy right now compared to the Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios above 3.3x and even P/S above 19x are quite common. 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 Xeris Biopharma Holdings

What Does Xeris Biopharma Holdings' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Xeris Biopharma Holdings has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

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

Retrospectively, the last year delivered an exceptional 55% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 19% each year during the coming three years according to the five analysts following the company. That's shaping up to be materially lower than the 53% per year growth forecast for the broader industry.

With this in consideration, its clear as to why Xeris Biopharma Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The latest share price surge wasn't enough to lift Xeris Biopharma Holdings' P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Xeris Biopharma Holdings 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. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Xeris Biopharma Holdings (of which 1 is concerning!) you should know about.

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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