Atara Biotherapeutics, Inc. (NASDAQ:ATRA) shareholders that were waiting for something to happen have been dealt a blow with a 49% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 80% share price decline.

Since its price has dipped substantially, Atara Biotherapeutics may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.2x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.2x and even P/S higher than 62x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

How Has Atara Biotherapeutics Performed Recently?

Atara Biotherapeutics hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For Atara Biotherapeutics?

Atara Biotherapeutics' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 40%. In spite of this, the company still managed to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

Looking ahead now, revenue is anticipated to climb by 54% per annum during the coming three years according to the five analysts following the company. That's shaping up to be materially lower than the 200% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Atara Biotherapeutics' 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 Final Word

Having almost fallen off a cliff, Atara Biotherapeutics' share price has pulled its P/S way down as well. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As expected, our analysis of Atara Biotherapeutics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 7 warning signs for Atara Biotherapeutics (1 is a bit unpleasant!) that you should be aware 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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