You may think that with a price-to-sales (or "P/S") ratio of 2.1x Treace Medical Concepts, Inc. (NASDAQ:TMCI) is a stock worth checking out, seeing as almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.1x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
How Has Treace Medical Concepts Performed Recently?
Treace Medical Concepts certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
Want the full picture on analyst estimates for the company? Then our free report on Treace Medical Concepts will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, Treace Medical Concepts would need to produce sluggish growth that's trailing the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 26%. Pleasingly, revenue has also lifted 202% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 11% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 10% each year, which is not materially different.
In light of this, it's peculiar that Treace Medical Concepts' P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.
What We Can Learn From Treace Medical Concepts' 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.
It looks to us like the P/S figures for Treace Medical Concepts remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.
There are also other vital risk factors to consider and we've discovered 2 warning signs for Treace Medical Concepts (1 is a bit concerning!) that you should be aware of before investing here.
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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
您可能认为,以市销率(或“P/S”)为2.1倍的Treace Medical Concepts, Inc. (NASDAQ:TMCI) 是值得考虑的股票,因为美国近一半的医疗设备公司的市销率都超过了3.1倍,甚至超过7倍的市销率也很常见。虽然,仅凭市销率做决策是不明智的,因为它可能有限制的原因。
近期Treace Medical Concepts的表现如何?
Treace Medical Concepts近期表现确实做得很好,因为它的营业收入增长速度超过了大多数其他公司。可能的原因之一是市销率低,因为投资者认为这种强劲的营收表现将来可能不如预期。如果该公司能够一直保持这样的表现,那么投资者应该会得到与其营收水平相匹配的股价回报。