Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.9% over the last year.

Although its price has surged higher, Arcturus Therapeutics Holdings may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.9x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 12x and even P/S higher than 66x are not unusual. 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.

What Does Arcturus Therapeutics Holdings' P/S Mean For Shareholders?

Arcturus Therapeutics Holdings 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.

How Is Arcturus Therapeutics Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Arcturus Therapeutics Holdings' 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 38%. In spite of this, the company still managed to deliver immense revenue growth over the last three years. So while the company has done a great job in the past, it's somewhat concerning to see revenue growth decline so harshly.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 38% per annum over the next three years. That's shaping up to be materially lower than the 148% per year growth forecast for the broader industry.

In light of this, it's understandable that Arcturus Therapeutics Holdings' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Arcturus Therapeutics Holdings' P/S?

Arcturus Therapeutics Holdings' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

As we suspected, our examination of Arcturus Therapeutics Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing 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.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Arcturus Therapeutics Holdings with six simple checks.

If you're unsure about the strength of Arcturus Therapeutics Holdings' 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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