Axogen, Inc. (NASDAQ:AXGN) Might Not Be As Mispriced As It Looks After Plunging 32%

Axogen, Inc. (NASDAQ:AXGN) shareholders that were waiting for something to happen have been dealt a blow with a 32% share price drop in the last month. Looking at the bigger picture, even after this poor month the stock is up 98% in the last year.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Axogen's P/S ratio of 2.7x, since the median price-to-sales (or "P/S") ratio for the Medical Equipment industry in the United States is also close to 2.8x. 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 Axogen

What Does Axogen's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Axogen has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Keen to find out how analysts think Axogen's 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 Axogen?

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

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. Pleasingly, revenue has also lifted 53% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% per year during the coming three years according to the seven analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.7% per year, which is noticeably less attractive.

With this information, we find it interesting that Axogen is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Following Axogen's share price tumble, its P/S is just clinging on to the industry median P/S. 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 Axogen currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Axogen with six simple checks on some of these key factors.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.