To the annoyance of some shareholders, Cryoport, Inc. (NASDAQ:CYRX) shares are down a considerable 28% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 55% loss during that time.

Following the heavy fall in price, Cryoport may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.7x, since almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 3.2x and even P/S higher than 6x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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

Recent times haven't been great for Cryoport as its revenue has been falling quicker than most other companies. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. If not, 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?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.2%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 84% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 10% over the next year. That's shaping up to be materially higher than the 4.1% growth forecast for the broader industry.

In light of this, it's peculiar that Cryoport's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Cryoport's P/S

Cryoport's P/S has taken a dip along with its share price. 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 Cryoport's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Cryoport that you should be aware of.

If you're unsure about the strength of Cryoport's 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.

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