Unfortunately for some shareholders, the Pacira BioSciences, Inc. (NASDAQ:PCRX) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 57% loss during that time.

Following the heavy fall in price, Pacira BioSciences' price-to-sales (or "P/S") ratio of 1x might make it look like a strong buy right now compared to the wider Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios above 3.1x and even P/S above 12x 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 Pacira BioSciences Performed Recently?

Pacira BioSciences could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

How Is Pacira BioSciences' Revenue Growth Trending?

In order to justify its P/S ratio, Pacira BioSciences would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.2%. This was backed up an excellent period prior to see revenue up by 37% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 0.3% each year over the next three years. Meanwhile, the broader industry is forecast to expand by 16% each year, which paints a poor picture.

With this information, we are not surprised that Pacira BioSciences is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Pacira BioSciences' P/S?

Shares in Pacira BioSciences have plummeted and its P/S has followed suit. 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.

As we suspected, our examination of Pacira BioSciences' analyst forecasts revealed that its outlook for shrinking revenue 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Pacira BioSciences that you should be aware of.

If you're unsure about the strength of Pacira BioSciences' 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.