Despite an already strong run, Heron Therapeutics, Inc. (NASDAQ:HRTX) shares have been powering on, with a gain of 48% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 5.4% over the last year.

Even after such a large jump in price, Heron Therapeutics may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.6x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 9.8x and even P/S higher than 51x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

How Heron Therapeutics Has Been Performing

Heron Therapeutics could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Heron Therapeutics' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Heron Therapeutics?

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

Retrospectively, the last year delivered a decent 14% gain to the company's revenues. Pleasingly, revenue has also lifted 67% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 13% per year over the next three years. With the industry predicted to deliver 127% growth each year, the company is positioned for a weaker revenue result.

With this information, we can see why Heron 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 Does Heron Therapeutics' P/S Mean For Investors?

Shares in Heron Therapeutics have risen appreciably however, its P/S is still subdued. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of Heron Therapeutics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. It's hard to see the share price rising strongly in the near future under these circumstances.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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.