Explore Assembly Biosciences's Fair Values from the Community and select yours

Despite an already strong run, Assembly Biosciences, Inc. (NASDAQ:ASMB) shares have been powering on, with a gain of 28% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 83% in the last year.

Although its price has surged higher, Assembly Biosciences may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.5x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 7.9x and even P/S higher than 61x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Assembly Biosciences

How Has Assembly Biosciences Performed Recently?

Assembly Biosciences 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Assembly Biosciences.

Is There Any Revenue Growth Forecasted For Assembly Biosciences?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Assembly Biosciences' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 55% 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.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 5.6% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 100% each year, which is noticeably more attractive.

With this information, we can see why Assembly Biosciences is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Assembly Biosciences' P/S Mean For Investors?

Despite Assembly Biosciences' share price climbing recently, its P/S still lags most other companies. 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 Assembly Biosciences maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

It is also worth noting that we have found 1 warning sign for Assembly Biosciences that you need to take into consideration.

If these risks are making you reconsider your opinion on Assembly Biosciences, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.