Lifecore Biomedical, Inc. (NASDAQ:LFCR) shares have had a really impressive month, gaining 42% after a shaky period beforehand. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 8.4% over the last year.

Even after such a large jump in price, Lifecore Biomedical may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.9x, considering almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 3.9x and even P/S higher than 6x 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.

What Does Lifecore Biomedical's P/S Mean For Shareholders?

Recent times have been advantageous for Lifecore Biomedical as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Lifecore Biomedical?

Lifecore Biomedical'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.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. The strong recent performance means it was also able to grow revenue by 66% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 6.8% each year as estimated by the three analysts watching the company. With the industry predicted to deliver 7.3% growth each year, the company is positioned for a comparable revenue result.

With this information, we find it odd that Lifecore Biomedical is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Even after such a strong price move, Lifecore Biomedical's P/S still trails the rest of the industry. 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 Lifecore Biomedical remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for Lifecore Biomedical (2 are significant) you should be aware of.

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.