Travere Therapeutics, Inc. (NASDAQ:TVTX) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Still, a bad month hasn't completely ruined the past year with the stock gaining 45%, which is great even in a bull market.

After such a large drop in price, Travere Therapeutics may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 6x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 11.9x and even P/S higher than 78x 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 reduced P/S.

How Has Travere Therapeutics Performed Recently?

Travere Therapeutics 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.

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Is There Any Revenue Growth Forecasted For Travere Therapeutics?

In order to justify its P/S ratio, Travere Therapeutics would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 114% gain to the company's top line. Pleasingly, revenue has also lifted 217% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 32% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 132% per annum, which is noticeably more attractive.

With this information, we can see why Travere Therapeutics is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Travere Therapeutics' P/S?

Travere Therapeutics' P/S has taken a dip along with its share price. 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 Travere 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. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Travere Therapeutics with six simple checks.

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.