There's Reason For Concern Over Lifecore Biomedical, Inc.'s (NASDAQ:LFCR) Massive 129% Price Jump
Those holding Lifecore Biomedical, Inc. (NASDAQ:LFCR) shares would be relieved that the share price has rebounded 129% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 63% share price drop in the last twelve months.
Although its price has surged higher, it's still not a stretch to say that Lifecore Biomedical's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Food industry in the United States, where the median P/S ratio is around 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Lifecore Biomedical
How Lifecore Biomedical Has Been Performing
Recent times haven't been great for Lifecore Biomedical as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
Keen to find out how analysts think Lifecore Biomedical's future stacks up against the industry? In that case, our free report is a great place to start.
How Is Lifecore Biomedical's Revenue Growth Trending?
In order to justify its P/S ratio, Lifecore Biomedical would need to produce growth that's similar to the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 5.3% last year. Still, lamentably revenue has fallen 69% in aggregate from three years ago, which is disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Looking ahead now, revenue is anticipated to slump, contracting by 25% during the coming year according to the dual analysts following the company. With the industry predicted to deliver 5.1% growth, that's a disappointing outcome.
In light of this, it's somewhat alarming that Lifecore Biomedical's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.
The Bottom Line On Lifecore Biomedical's P/S
Lifecore Biomedical appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.
It appears that Lifecore Biomedical currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.
Before you take the next step, you should know about the 3 warning signs for Lifecore Biomedical (1 makes us a bit uncomfortable!) that we have uncovered.
If you're unsure about the strength of Lifecore Biomedical's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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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