AngioDynamics, Inc. (NASDAQ:ANGO) shares have had a really impressive month, gaining 25% after a shaky period beforehand. 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.

In spite of the firm bounce in price, AngioDynamics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.8x, considering almost half of all companies in the Medical Equipment industry 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. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How AngioDynamics Has Been Performing

AngioDynamics could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as depressed as AngioDynamics' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 3.2% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 19% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 1.6% per annum over the next three years. That's shaping up to be materially lower than the 10% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why AngioDynamics' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does AngioDynamics' P/S Mean For Investors?

Shares in AngioDynamics have risen appreciably however, its P/S is still subdued. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of AngioDynamics' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for AngioDynamics you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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