Even With A 26% Surge, Cautious Investors Are Not Rewarding AxoGen, Inc.'s (NASDAQ:AXGN) Performance Completely
AxoGen, Inc. (NASDAQ:AXGN) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. The last 30 days bring the annual gain to a very sharp 48%.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about AxoGen's P/S ratio of 3.2x, since the median price-to-sales (or "P/S") ratio for the Medical Equipment industry in the United States is also close to 3.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
View our latest analysis for AxoGen
What Does AxoGen's Recent Performance Look Like?
There hasn't been much to differentiate AxoGen's and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on AxoGen will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.
Want the full picture on analyst estimates for the company? Then our free report on AxoGen will help you uncover what's on the horizon.
Do Revenue Forecasts Match The P/S Ratio?
AxoGen's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered a decent 8.8% gain to the company's revenues. Revenue has also lifted 30% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.
Turning to the outlook, the next three years should generate growth of 13% per year as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 8.9% each year growth forecast for the broader industry.
In light of this, it's curious that AxoGen's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
What We Can Learn From AxoGen's P/S?
Its shares have lifted substantially and now AxoGen's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that AxoGen currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. 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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.
Don't forget that there may be other risks. For instance, we've identified 1 warning sign for AxoGen that you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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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