CareCloud, Inc. (NASDAQ:CCLD) Shares Fly 34% But Investors Aren't Buying For Growth

CareCloud, Inc. (NASDAQ:CCLD) shareholders have had their patience rewarded with a 34% share price jump in the last month. The annual gain comes to 176% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, CareCloud's price-to-sales (or "P/S") ratio of 0.5x might still make it look like a buy right now compared to the Healthcare Services industry in the United States, where around half of the companies have P/S ratios above 2.1x and even P/S above 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 limited.

See our latest analysis for CareCloud

What Does CareCloud's Recent Performance Look Like?

CareCloud could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. As a result, revenue from three years ago have also fallen 12% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 1.5% over the next year. That's shaping up to be materially lower than the 8.7% growth forecast for the broader industry.

In light of this, it's understandable that CareCloud's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

CareCloud's stock price has surged recently, but its but its P/S still remains modest. 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 CareCloud's 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 4 warning signs for CareCloud that you need to take into consideration.

If you're unsure about the strength of CareCloud'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.