Acutus Medical, Inc. (NASDAQ:AFIB) shareholders won't be pleased to see that the share price has had a very rough month, dropping 29% and undoing the prior period's positive performance.    The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 85% loss during that time.  

After such a large drop in price, Acutus Medical may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.6x and even P/S higher than 8x aren't out of the ordinary.   However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.  

NasdaqCM:AFIB Price to Sales Ratio vs Industry February 24th 2024

What Does Acutus Medical's Recent Performance Look Like?

Acutus Medical has been doing a good job lately as it's been growing revenue at a solid pace.   It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S.  Those who are bullish on Acutus Medical will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.    

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Acutus Medical will help you shine a light on its historical performance.  

Is There Any Revenue Growth Forecasted For Acutus Medical?  

Acutus Medical'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.  

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line.   The strong recent performance means it was also able to grow revenue by 200% in total over the last three years.  Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.  

Comparing that to the industry, which is only predicted to deliver 8.5% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Acutus Medical's P/S isn't as high compared to that of its industry peers.  It looks like most investors are not convinced the company can maintain its recent growth rates.  

The Bottom Line On Acutus Medical's P/S

Having almost fallen off a cliff, Acutus Medical's share price has pulled its P/S way down as well.      Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We're very surprised to see Acutus Medical currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast.  When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio.  While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.    

And what about other risks? Every company has them, and we've spotted   4 warning signs for Acutus Medical  (of which 3 are potentially serious!) you should know about.  

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.