A Piece Of The Puzzle Missing From LENSAR, Inc.'s (NASDAQ:LNSR) Share Price
With a price-to-sales (or "P/S") ratio of 0.8x LENSAR, Inc. (NASDAQ:LNSR) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.3x and even P/S higher than 7x 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.
View our latest analysis for LENSAR
How Has LENSAR Performed Recently?
Recent times haven't been great for LENSAR as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on LENSAR will help you uncover what's on the horizon.
How Is LENSAR's Revenue Growth Trending?
LENSAR's 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.
If we review the last year of revenue growth, the company posted a worthy increase of 3.7%. The latest three year period has also seen an excellent 39% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Turning to the outlook, the next year should generate growth of 30% as estimated by the one analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.7%, which is noticeably less attractive.
With this information, we find it odd that LENSAR is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Bottom Line On LENSAR's P/S
While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
A look at LENSAR's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.
And what about other risks? Every company has them, and we've spotted 3 warning signs for LENSAR you should know about.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.
