Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) Stock Catapults 46% Though Its Price And Business Still Lag The Industry

Amneal Pharmaceuticals, Inc. Class A +1.12%

Amneal Pharmaceuticals, Inc. Class A

AMRX

5.42

+1.12%

The Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) share price has done very well over the last month, posting an excellent gain of 46%. The annual gain comes to 212% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Amneal Pharmaceuticals may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 19x 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.

Check out our latest analysis for Amneal Pharmaceuticals

ps-multiple-vs-industry
NasdaqGS:AMRX Price to Sales Ratio vs Industry December 28th 2023

What Does Amneal Pharmaceuticals' P/S Mean For Shareholders?

Amneal Pharmaceuticals 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 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 Amneal Pharmaceuticals' 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 Amneal Pharmaceuticals?

Amneal 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.

Retrospectively, the last year delivered a decent 12% gain to the company's revenues. The latest three year period has also seen a 27% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.3% during the coming year according to the four analysts following the company. That's shaping up to be materially lower than the 31% growth forecast for the broader industry.

With this in consideration, its clear as to why Amneal 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 We Can Learn From Amneal Pharmaceuticals' P/S?

Even after such a strong price move, Amneal Pharmaceuticals' P/S still trails the rest of the industry. 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.

As expected, our analysis of Amneal 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Amneal Pharmaceuticals (including 1 which shouldn't be ignored).

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).

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