The Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB) share price has fared very poorly over the last month, falling by a substantial 28%. Looking at the bigger picture, even after this poor month the stock is up 70% in the last year.

Following the heavy fall in price, Y-mAbs Therapeutics' price-to-sales (or "P/S") ratio of 5.6x might make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 10.5x and even P/S above 59x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Has Y-mAbs Therapeutics Performed Recently?

Y-mAbs Therapeutics 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.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Y-mAbs Therapeutics would need to produce sluggish growth that's 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 9.0%. 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 14% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 120% each year, which is noticeably more attractive.

With this information, we can see why Y-mAbs 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.

The Key Takeaway

Y-mAbs Therapeutics' P/S has taken a dip along with its share price. 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.

We've established that Y-mAbs Therapeutics maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Y-mAbs Therapeutics is showing 4 warning signs in our investment analysis, and 1 of those is significant.

If you're unsure about the strength of Y-mAbs Therapeutics' 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.