The AnaptysBio, Inc. (NASDAQ:ANAB) share price has fared very poorly over the last month, falling by a substantial 45%. Still, a bad month hasn't completely ruined the past year with the stock gaining 28%, which is great even in a bull market.

Although its price has dipped substantially, it's still not a stretch to say that AnaptysBio's price-to-sales (or "P/S") ratio of 10.1x right now seems quite "middle-of-the-road" compared to the Biotechs industry in the United States, where the median P/S ratio is around 10.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does AnaptysBio's Recent Performance Look Like?

Recent times haven't been great for AnaptysBio as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

How Is AnaptysBio's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like AnaptysBio's to be considered reasonable.

Retrospectively, the last year delivered an explosive gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 53% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 2.9% per annum during the coming three years according to the twelve analysts following the company. That's not great when the rest of the industry is expected to grow by 120% per year.

In light of this, it's somewhat alarming that AnaptysBio's P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Final Word

With its share price dropping off a cliff, the P/S for AnaptysBio looks to be in line with the rest of the Biotechs industry. 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.

Our check of AnaptysBio's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

Before you take the next step, you should know about the 5 warning signs for AnaptysBio (1 is concerning!) that we have uncovered.

If these risks are making you reconsider your opinion on AnaptysBio, 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.