AngioDynamics, Inc.'s (NASDAQ:ANGO) Share Price Boosted 38% But Its Business Prospects Need A Lift Too

Despite an already strong run, AngioDynamics, Inc. (NASDAQ:ANGO) shares have been powering on, with a gain of 38% in the last thirty days. The annual gain comes to 111% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, AngioDynamics' price-to-sales (or "P/S") ratio of 1.8x might still make it look like a buy right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 3.6x and even P/S above 8x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for AngioDynamics

What Does AngioDynamics' Recent Performance Look Like?

AngioDynamics hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on AngioDynamics.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, AngioDynamics would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. As a result, revenue from three years ago have also fallen 5.5% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 6.1% each year over the next three years. With the industry predicted to deliver 9.4% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why AngioDynamics' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Despite AngioDynamics' share price climbing recently, its P/S still lags most other companies. 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.

As expected, our analysis of AngioDynamics' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for AngioDynamics that you need to be mindful of.

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