Investors Don't See Light At End Of C4 Therapeutics, Inc.'s (NASDAQ:CCCC) Tunnel And Push Stock Down 40%

Unfortunately for some shareholders, the C4 Therapeutics, Inc. (NASDAQ:CCCC) share price has dived 40% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 82% share price decline.

After such a large drop in price, C4 Therapeutics may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2.5x, considering almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 8.8x and even P/S higher than 51x aren't out of the ordinary. 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.

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See our latest analysis for C4 Therapeutics

How Has C4 Therapeutics Performed Recently?

C4 Therapeutics 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 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on C4 Therapeutics.

Is There Any Revenue Growth Forecasted For C4 Therapeutics?

The only time you'd be truly comfortable seeing a P/S as depressed as C4 Therapeutics' is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 71%. However, this wasn't enough as the latest three year period has seen the company endure a nasty 22% drop in revenue in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 20% per annum during the coming three years according to the eight analysts following the company. That's not great when the rest of the industry is expected to grow by 173% each year.

With this in consideration, we find it intriguing that C4 Therapeutics' P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On C4 Therapeutics' P/S

Having almost fallen off a cliff, C4 Therapeutics' share price has pulled its P/S way down as well. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of C4 Therapeutics' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. 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.

And what about other risks? Every company has them, and we've spotted 4 warning signs for C4 Therapeutics (of which 1 is concerning!) you should know about.

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.