Pinning Down 908 Devices Inc.'s (NASDAQ:MASS) P/S Is Difficult Right Now
When you see that almost half of the companies in the Electronic industry in the United States have price-to-sales ratios (or "P/S") below 1.5x, 908 Devices Inc. (NASDAQ:MASS) looks to be giving off strong sell signals with its 5.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.
View our latest analysis for 908 Devices
What Does 908 Devices' P/S Mean For Shareholders?
908 Devices' revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Want the full picture on analyst estimates for the company? Then our free report on 908 Devices will help you uncover what's on the horizon.
Do Revenue Forecasts Match The High P/S Ratio?
908 Devices' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
If we review the last year of revenue growth, the company posted a worthy increase of 11%. This was backed up an excellent period prior to see revenue up by 161% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.
Turning to the outlook, the next year should generate growth of 6.8% as estimated by the five analysts watching the company. That's shaping up to be similar to the 6.2% growth forecast for the broader industry.
With this in consideration, we find it intriguing that 908 Devices' P/S is higher than its industry peers. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.
What Does 908 Devices' P/S Mean For Investors?
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Given 908 Devices' future revenue forecasts are in line with the wider industry, the fact that it trades at an elevated P/S is somewhat surprising. When we see revenue growth that just matches the industry, we don't expect elevates P/S figures to remain inflated for the long-term. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Before you settle on your opinion, we've discovered 4 warning signs for 908 Devices (1 makes us a bit uncomfortable!) that you should be aware of.
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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