Cytosorbents Corporation (NASDAQ:CTSO) Might Not Be As Mispriced As It Looks
It's not a stretch to say that Cytosorbents Corporation's (NASDAQ:CTSO) price-to-sales (or "P/S") ratio of 4x right now seems quite "middle-of-the-road" for companies in the Medical Equipment industry in the United States, where the median P/S ratio is around 3.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
Check out our latest analysis for Cytosorbents
What Does Cytosorbents' P/S Mean For Shareholders?
Cytosorbents hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Cytosorbents will help you uncover what's on the horizon.
Do Revenue Forecasts Match The P/S Ratio?
The only time you'd be comfortable seeing a P/S like Cytosorbents' is when the company's growth is tracking the industry closely.
Retrospectively, the last year delivered a frustrating 20% decrease to the company's top line. Even so, admirably revenue has lifted 39% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Turning to the outlook, the next three years should generate growth of 21% per annum as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 8.9% per year growth forecast for the broader industry.
With this in consideration, we find it intriguing that Cytosorbents' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.
The Bottom Line On Cytosorbents' P/S
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.
Looking at Cytosorbents' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
You need to take note of risks, for example - Cytosorbents has 3 warning signs (and 1 which is significant) we think 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.
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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.
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