Apyx Medical Corporation's (NASDAQ:APYX) Shares Leap 38% Yet They're Still Not Telling The Full Story

Despite an already strong run, Apyx Medical Corporation (NASDAQ:APYX) shares have been powering on, with a gain of 38% in the last thirty days. The annual gain comes to 228% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, it's still not a stretch to say that Apyx Medical's price-to-sales (or "P/S") ratio of 3.2x right now seems quite "middle-of-the-road" compared to the Medical Equipment industry in the United States, where the median P/S ratio is around 3.1x. 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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Check out our latest analysis for Apyx Medical

What Does Apyx Medical's Recent Performance Look Like?

Apyx Medical 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. 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 Apyx Medical's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Apyx Medical's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 1.3% decrease to the company's top line. As a result, revenue from three years ago have also fallen 1.7% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 13% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.2% per year, which is noticeably less attractive.

With this information, we find it interesting that Apyx Medical is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Apyx Medical's P/S?

Its shares have lifted substantially and now Apyx Medical's P/S is back within range of the industry median. 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.

We've established that Apyx Medical currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 3 warning signs for Apyx Medical (1 is a bit unpleasant!) that you need to take into consideration.

If you're unsure about the strength of Apyx Medical's 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.