ADC Therapeutics SA (NYSE:ADCT) shares have had a horrible month, losing 31% after a relatively good period beforehand. The good news is that in the last year, the stock has shone bright like a diamond, gaining 201%.

Since its price has dipped substantially, ADC Therapeutics may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.9x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 10.3x and even P/S higher than 61x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

How Has ADC Therapeutics Performed Recently?

ADC Therapeutics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Is There Any Revenue Growth Forecasted For ADC Therapeutics?

In order to justify its P/S ratio, ADC Therapeutics would need to produce anemic growth that's substantially trailing 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 42%. 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.

Looking ahead now, revenue is anticipated to climb by 29% each year during the coming three years according to the seven analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 119% each year, which is noticeably more attractive.

In light of this, it's understandable that ADC Therapeutics' 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.

The Bottom Line On ADC Therapeutics' P/S

ADC Therapeutics' P/S looks about as weak as its stock price lately. 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 ADC Therapeutics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 4 warning signs for ADC Therapeutics (1 is significant!) that you should be aware of.

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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