Surgical Innovations Group plc (LON:SUN) Shares Fly 63% But Investors Aren't Buying For Growth

Surgical Innovations Group plc (LON:SUN) shares have had a really impressive month, gaining 63% after a shaky period beforehand. But the last month did very little to improve the 66% share price decline over the last year.

In spite of the firm bounce in price, Surgical Innovations Group may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Medical Equipment industry in the United Kingdom have P/S ratios greater than 3.7x and even P/S higher than 9x 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.

See our latest analysis for Surgical Innovations Group

What Does Surgical Innovations Group's P/S Mean For Shareholders?

Surgical Innovations Group's revenue growth of late has been pretty similar to 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 optimistic about the future direction of the share price.

Keen to find out how analysts think Surgical Innovations Group's 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?

In order to justify its P/S ratio, Surgical Innovations Group would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a decent 5.9% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 90% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 3.6% over the next year. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.

In light of this, it's understandable that Surgical Innovations Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Surgical Innovations Group's P/S?

Shares in Surgical Innovations Group have risen appreciably however, its P/S is still subdued. 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 Surgical Innovations Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. 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 2 warning signs for Surgical Innovations Group that you need to take into consideration.

If these risks are making you reconsider your opinion on Surgical Innovations Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com