AngioDynamics, Inc.'s (NASDAQ:ANGO) Shares Bounce 26% But Its Business Still Trails The Industry

AngioDynamics, Inc. (NASDAQ:ANGO) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 26% over that time.

Although its price has surged higher, AngioDynamics may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.4x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for AngioDynamics

How AngioDynamics Has Been Performing

While the industry has experienced revenue growth lately, AngioDynamics' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is AngioDynamics' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as AngioDynamics' is when the company's growth is on track to lag the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.2%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 19% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 1.6% each year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 10% each year, which is noticeably more attractive.

With this in consideration, its clear as to why AngioDynamics' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Shares in AngioDynamics have risen appreciably however, its P/S is still subdued. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

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. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for AngioDynamics that you need to take into consideration.

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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