iCAD, Inc. (NASDAQ:ICAD) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 26% over that time.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about iCAD's P/S ratio of 2.4x, since the median price-to-sales (or "P/S") ratio for the Healthcare Services industry in the United States is also close to 2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does iCAD's P/S Mean For Shareholders?

iCAD could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Some Revenue Growth Forecasted For iCAD?

The only time you'd be comfortable seeing a P/S like iCAD's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 7.4% gain to the company's revenues. Still, lamentably revenue has fallen 45% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 15% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.4%, which is noticeably less attractive.

With this in consideration, we find it intriguing that iCAD's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does iCAD's P/S Mean For Investors?

Its shares have lifted substantially and now iCAD's P/S is back within range of the industry median. 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.

Looking at iCAD's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware iCAD is showing 3 warning signs 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.