Revenues Tell The Story For OptimizeRx Corporation (NASDAQ:OPRX)
OptimizeRx Corporation's (NASDAQ:OPRX) price-to-sales (or "P/S") ratio of 3.4x may not look like an appealing investment opportunity when you consider close to half the companies in the Healthcare Services industry in the United States have P/S ratios below 2.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.
Check out our latest analysis for OptimizeRx
How OptimizeRx Has Been Performing
OptimizeRx could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. If not, then existing shareholders may be extremely nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on OptimizeRx will help you uncover what's on the horizon.
How Is OptimizeRx's Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as high as OptimizeRx's is when the company's growth is on track to outshine the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.3%. Even so, admirably revenue has lifted 129% 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 year should generate growth of 16% as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.
In light of this, it's understandable that OptimizeRx's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Bottom Line On OptimizeRx's P/S
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our look into OptimizeRx shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
Having said that, be aware OptimizeRx is showing 1 warning sign in our investment analysis, 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.
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