Some Confidence Is Lacking In AirSculpt Technologies, Inc. (NASDAQ:AIRS) As Shares Slide 31%

To the annoyance of some shareholders, AirSculpt Technologies, Inc. (NASDAQ:AIRS) shares are down a considerable 31% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 67% share price decline.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about AirSculpt Technologies' P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in the United States is also close to 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for AirSculpt Technologies

How AirSculpt Technologies Has Been Performing

While the industry has experienced revenue growth lately, AirSculpt Technologies' revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For AirSculpt Technologies?

There's an inherent assumption that a company should be matching the industry for P/S ratios like AirSculpt Technologies' to be considered reasonable.

Retrospectively, the last year delivered a frustrating 7.9% decrease to the company's top line. Even so, admirably revenue has lifted 35% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 1.9% per year over the next three years. That's shaping up to be materially lower than the 8.0% per year growth forecast for the broader industry.

With this information, we find it interesting that AirSculpt Technologies is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

AirSculpt Technologies' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Our look at the analysts forecasts of AirSculpt Technologies' revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Before you take the next step, you should know about the 2 warning signs for AirSculpt Technologies that we have uncovered.

If these risks are making you reconsider your opinion on AirSculpt Technologies, 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.