Akebia Therapeutics, Inc. (NASDAQ:AKBA) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. Looking further back, the 21% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Akebia Therapeutics' price-to-sales (or "P/S") ratio of 1.6x might still make it look like a strong buy right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios above 12.2x and even P/S above 69x 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 so limited.

How Has Akebia Therapeutics Performed Recently?

While the industry has experienced revenue growth lately, Akebia Therapeutics' revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

How Is Akebia Therapeutics' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Akebia Therapeutics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 31% decrease to the company's top line. As a result, revenue from three years ago have also fallen 28% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 11% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 212% each year, which is noticeably more attractive.

With this information, we can see why Akebia Therapeutics is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Akebia Therapeutics' P/S Mean For Investors?

Even after such a strong price move, Akebia Therapeutics' P/S still trails the rest of 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.

As expected, our analysis of Akebia Therapeutics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 3 warning signs for Akebia Therapeutics you should be aware of, and 1 of them doesn't sit too well with us.

If these risks are making you reconsider your opinion on Akebia Therapeutics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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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