The Arvinas, Inc. (NASDAQ:ARVN) share price has fared very poorly over the last month, falling by a substantial 27%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 54% loss during that time.

In spite of the heavy fall in price, Arvinas may still be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 8.1x, when you consider almost half of the companies in the Pharmaceuticals industry in the United States have P/S ratios under 3.1x and even P/S lower than 0.9x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

How Arvinas Has Been Performing

Arvinas could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

How Is Arvinas' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Arvinas' is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Despite the lack of growth, the company was still able to deliver immense revenue growth over the last three years. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Turning to the outlook, the next three years should generate growth of 29% per annum as estimated by the analysts watching the company. With the industry only predicted to deliver 20% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Arvinas' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Arvinas' P/S?

A significant share price dive has done very little to deflate Arvinas' very lofty P/S. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Arvinas maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Pharmaceuticals industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Arvinas you should know about.

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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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.