Not Many Are Piling Into CareCloud, Inc. (NASDAQ:CCLD) Stock Yet As It Plummets 65%

CareCloud, Inc. (NASDAQ:CCLD) shareholders won't be pleased to see that the share price has had a very rough month, dropping 65% and undoing the prior period's positive performance. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 21%.

Following the heavy fall in price, CareCloud may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Healthcare Services industry in the United States have P/S ratios greater than 2.4x and even P/S higher than 8x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for CareCloud

What Does CareCloud's P/S Mean For Shareholders?

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. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think CareCloud'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 Low P/S?

CareCloud's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a frustrating 8.4% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 17% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 14% per annum during the coming three years according to the five analysts following the company. With the industry only predicted to deliver 11% per year, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that CareCloud's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Shares in CareCloud have plummeted and its P/S has followed suit. 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.

To us, it seems CareCloud currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for CareCloud that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.