You may think that with a price-to-sales (or "P/S") ratio of 1.5x Pacira BioSciences, Inc. (NASDAQ:PCRX) is a stock worth checking out, seeing as almost half of all the Pharmaceuticals companies in the United States have P/S ratios greater than 3.2x and even P/S higher than 12x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Pacira BioSciences' P/S Mean For Shareholders?

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 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 Pacira BioSciences' future stacks up against the industry? In that case, our free report is a great place to start .

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as Pacira BioSciences' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 3.9% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 29% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 10% each year during the coming three years according to the seven analysts following the company. That's shaping up to be materially lower than the 19% each year growth forecast for the broader industry.

With this information, we can see why Pacira BioSciences 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 Pacira BioSciences' P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Pacira BioSciences maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

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 Pacira BioSciences with six simple checks.

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.

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.