Nanalysis Scientific Corp. (CVE:NSCI) Shares Fly 43% But Investors Aren't Buying For Growth

The Nanalysis Scientific Corp. (CVE:NSCI) share price has done very well over the last month, posting an excellent gain of 43%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 16% in the last twelve months.

Even after such a large jump in price, Nanalysis Scientific's price-to-sales (or "P/S") ratio of 2.2x might still make it look like a buy right now compared to the Medical Equipment industry in Canada, where around half of the companies have P/S ratios above 3.2x and even P/S above 115x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Nanalysis Scientific

How Has Nanalysis Scientific Performed Recently?

Nanalysis Scientific certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. Perhaps the market is expecting future revenue performance to follow the rest of the industry downwards, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nanalysis Scientific.

How Is Nanalysis Scientific's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. The latest three year period has also seen an excellent 252% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 26% as estimated by the one analyst watching the company. With the industry predicted to deliver 49% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Nanalysis Scientific is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Nanalysis Scientific's P/S?

The latest share price surge wasn't enough to lift Nanalysis Scientific's P/S close to the industry median. 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.

We've established that Nanalysis Scientific maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 4 warning signs for Nanalysis Scientific (2 are a bit unpleasant!) that you need to take into consideration.

If you're unsure about the strength of Nanalysis Scientific's 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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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.