Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 66% share price decline.

After such a large drop in price, Apellis Pharmaceuticals' price-to-sales (or "P/S") ratio of 3x might make it look like a strong buy right now compared to the wider Biotechs industry in the United States, where around half of the companies have P/S ratios above 8x and even P/S above 46x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How Has Apellis Pharmaceuticals Performed Recently?

With revenue growth that's inferior to most other companies of late, Apellis Pharmaceuticals has been relatively sluggish. 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.

Keen to find out how analysts think Apellis Pharmaceuticals' 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?

Apellis Pharmaceuticals' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 97% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 18% each year during the coming three years according to the analysts following the company. With the industry predicted to deliver 171% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Apellis Pharmaceuticals' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Apellis Pharmaceuticals' P/S Mean For Investors?

Apellis Pharmaceuticals' P/S looks about as weak as its stock price lately. 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 Apellis Pharmaceuticals' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

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.

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.