With Xvivo Perfusion AB (publ) (STO:XVIVO) It Looks Like You'll Get What You Pay For

With a price-to-sales (or "P/S") ratio of 19.9x Xvivo Perfusion AB (publ) (STO:XVIVO) may be sending very bearish signals at the moment, given that almost half of all the Medical Equipment companies in Sweden have P/S ratios under 4.8x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Xvivo Perfusion

How Has Xvivo Perfusion Performed Recently?

Recent times have been advantageous for Xvivo Perfusion as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Xvivo Perfusion's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Xvivo Perfusion's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 31%. Pleasingly, revenue has also lifted 222% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 40% per annum as estimated by the six analysts watching the company. That's shaping up to be materially higher than the 15% per annum growth forecast for the broader industry.

With this information, we can see why Xvivo Perfusion is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Xvivo Perfusion's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Xvivo Perfusion maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Medical Equipment industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Xvivo Perfusion with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Xvivo Perfusion, 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.