With a price-to-sales (or "P/S") ratio of 1.2x Enovis Corporation (NYSE:ENOV) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.4x and even P/S higher than 8x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

How Enovis Has Been Performing

Enovis 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.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Enovis' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 17% overall. 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 14% during the coming year according to the eleven analysts following the company. With the industry only predicted to deliver 9.4%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Enovis' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Enovis' 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.

Enovis' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Enovis that you should be aware of.

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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