Cerus Corporation (NASDAQ:CERS) Stock's 26% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Cerus Corporation (NASDAQ:CERS) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Longer-term, the stock has been solid despite a difficult 30 days, gaining 16% in the last year.

Since its price has dipped substantially, Cerus may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.9x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.2x and even P/S higher than 7x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Cerus

What Does Cerus' P/S Mean For Shareholders?

Recent revenue growth for Cerus has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on Cerus will be hoping that this isn't the case.

Want the full picture on analyst estimates for the company? Then our free report on Cerus will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Cerus?

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

Retrospectively, the last year delivered a decent 11% gain to the company's revenues. Pleasingly, revenue has also lifted 59% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 16% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 9.0%, which is noticeably less attractive.

With this information, we find it odd that Cerus is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Cerus' P/S Mean For Investors?

Cerus' recently weak share price has pulled its P/S back below other Medical Equipment companies. 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.

To us, it seems Cerus 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. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Cerus 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.