CareCloud, Inc. (NASDAQ:CCLD) Looks Inexpensive After Falling 26% But Perhaps Not Attractive Enough

CareCloud, Inc. (NASDAQ:CCLD) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 28% share price drop.

Following the heavy fall in price, CareCloud may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Healthcare Services industry in the United States have P/S ratios greater than 2.3x and even P/S higher than 5x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for CareCloud

What Does CareCloud's Recent Performance Look Like?

While the industry has experienced revenue growth lately, CareCloud's 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 CareCloud.

Is There Any Revenue Growth Forecasted For CareCloud?

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

Retrospectively, the last year delivered a frustrating 15% decrease to the company's top line. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 4.9% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 9.7%, which is noticeably more attractive.

With this information, we can see why CareCloud is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Having almost fallen off a cliff, CareCloud's share price has pulled its P/S way down as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of CareCloud's 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. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you take the next step, you should know about the 4 warning signs for CareCloud (1 is significant!) that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com