Nephros, Inc.'s (NASDAQ:NEPH) 79% Jump Shows Its Popularity With Investors

Despite an already strong run, Nephros, Inc. (NASDAQ:NEPH) shares have been powering on, with a gain of 79% in the last thirty days. The last 30 days bring the annual gain to a very sharp 83%.

Following the firm bounce in price, given close to half the companies operating in the United States' Machinery industry have price-to-sales ratios (or "P/S") below 1.6x, you may consider Nephros as a stock to potentially avoid with its 2.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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Check out our latest analysis for Nephros

How Nephros Has Been Performing

Recent times have been pleasing for Nephros as its revenue has risen in spite of the industry's average revenue going into reverse. Perhaps the market is expecting the company's future revenue growth to buck the trend of the industry, contributing to a higher P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Nephros' Revenue Growth Trending?

In order to justify its P/S ratio, Nephros would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. The latest three year period has also seen an excellent 61% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 6.7% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 0.4% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Nephros' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Nephros' P/S Mean For Investors?

Nephros' P/S is on the rise since its shares have risen strongly. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Nephros maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Machinery industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 3 warning signs we've spotted with Nephros (including 1 which is a bit unpleasant).

If you're unsure about the strength of Nephros' 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.