Cytosorbents Corporation (NASDAQ:CTSO) shareholders are no doubt pleased to see that the share price has bounced 37% in the last month, although it is still struggling to make up recently lost ground. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.
Even after such a large jump in price, Cytosorbents may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.3x, considering almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.4x and even P/S higher than 8x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
Check out our latest analysis for Cytosorbents
NasdaqCM:CTSO Price to Sales Ratio vs Industry December 28th 2023
What Does Cytosorbents' Recent Performance Look Like?
Recent times haven't been great for Cytosorbents as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.
Keen to find out how analysts think Cytosorbents' future stacks up against the industry? In that case, our free report is a great place to start.
Do Revenue Forecasts Match The Low P/S Ratio?
The only time you'd be truly comfortable seeing a P/S as low as Cytosorbents' is when the company's growth is on track to lag the industry.
If we review the last year of revenue growth, the company posted a worthy increase of 2.7%. However, due to its less than impressive performance prior to this period, revenue growth is practically non-existent over the last three years overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.
Looking ahead now, revenue is anticipated to climb by 28% each year during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.8% each year, which is noticeably less attractive.
In light of this, it's peculiar that Cytosorbents' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Key Takeaway
The latest share price surge wasn't enough to lift Cytosorbents' P/S close to the industry median. 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.
Cytosorbents' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.
You should always think about risks. Case in point, we've spotted 3 warning signs for Cytosorbents you should be aware of.
If you're unsure about the strength of Cytosorbents' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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