You may think that with a price-to-sales (or "P/S") ratio of 1.9x Enovis Corporation (NYSE:ENOV) 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 3.3x and even P/S higher than 8x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Enovis

What Does Enovis' P/S Mean For Shareholders?

Recent revenue growth for Enovis has been in line with the industry. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Enovis would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.9% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 47% overall drop in revenue. 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 9.7% per annum during the coming three years according to the eight analysts following the company. That's shaping up to be similar to the 9.8% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that Enovis' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Enovis remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Enovis with six simple checks on some of these key factors.

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.