Cerus Corporation's (NASDAQ:CERS) 30% Jump Shows Its Popularity With Investors

Cerus Corporation (NASDAQ:CERS) shares have continued their recent momentum with a 30% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Cerus' price-to-sales (or "P/S") ratio of 2.7x is worth a mention when the median P/S in the United States' Medical Equipment industry is similar at about 3.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Cerus

How Cerus Has Been Performing

Cerus could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Cerus' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 5.3%. The latest three year period has also seen an excellent 69% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 9.1% as estimated by the four analysts watching the company. That's shaping up to be similar to the 9.5% growth forecast for the broader industry.

With this in mind, it makes sense that Cerus' P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Its shares have lifted substantially and now Cerus' P/S is back within range of the industry median. 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.

We've seen that Cerus maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You always need to take note of risks, for example - Cerus has 3 warning signs we think you should be aware of.

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.

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