Erika B-Cure Laser Ltd's (TLV:BCUR) Shares Bounce 27% But Its Business Still Trails The Industry

Erika B-Cure Laser Ltd (TLV:BCUR) shares have continued their recent momentum with a 27% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 12% in the last twelve months.

Even after such a large jump in price, Erika B-Cure Laser's price-to-sales (or "P/S") ratio of 0.7x might still make it look like a strong buy right now compared to the wider Medical Equipment industry in Israel, where around half of the companies have P/S ratios above 4.7x and even P/S above 13x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Erika B-Cure Laser

What Does Erika B-Cure Laser's Recent Performance Look Like?

Erika B-Cure Laser has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Erika B-Cure Laser will help you shine a light on its historical performance.

How Is Erika B-Cure Laser's Revenue Growth Trending?

In order to justify its P/S ratio, Erika B-Cure Laser would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 27%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 61% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 16% shows it's an unpleasant look.

With this information, we are not surprised that Erika B-Cure Laser is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What We Can Learn From Erika B-Cure Laser's P/S?

Even after such a strong price move, Erika B-Cure Laser's P/S still trails the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that Erika B-Cure Laser maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Erika B-Cure Laser that you should be aware of.

If you're unsure about the strength of Erika B-Cure Laser'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.