Market Participants Recognise Accelerate Diagnostics, Inc.'s (NASDAQ:AXDX) Revenues Pushing Shares 38% Higher

Accelerate Diagnostics, Inc. (NASDAQ:AXDX) shareholders are no doubt pleased to see that the share price has bounced 38% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

Following the firm bounce in price, Accelerate Diagnostics' price-to-sales (or "P/S") ratio of 5.2x might make it look like a sell right now compared to the wider Medical Equipment industry in the United States, where around half of the companies have P/S ratios below 3.5x and even P/S below 1.5x 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 as high as it is.

View our latest analysis for Accelerate Diagnostics

What Does Accelerate Diagnostics' Recent Performance Look Like?

There hasn't been much to differentiate Accelerate Diagnostics' and the industry's revenue growth lately. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Accelerate Diagnostics' Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Accelerate Diagnostics' to be considered reasonable.

Retrospectively, the last year delivered a decent 8.2% gain to the company's revenues. Pleasingly, revenue has also lifted 37% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 24% per year over the next three years. That's shaping up to be materially higher than the 8.9% each year growth forecast for the broader industry.

With this information, we can see why Accelerate Diagnostics is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Accelerate Diagnostics' P/S Mean For Investors?

Accelerate Diagnostics' P/S is on the rise since its shares have risen strongly. 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.

We've established that Accelerate Diagnostics maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Medical Equipment industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 6 warning signs for Accelerate Diagnostics (2 can't be ignored!) that you should be aware of before investing here.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.