After Leaping 31% ClearPoint Neuro, Inc. (NASDAQ:CLPT) Shares Are Not Flying Under The Radar

Those holding ClearPoint Neuro, Inc. (NASDAQ:CLPT) shares would be relieved that the share price has rebounded 31% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last month tops off a massive increase of 146% in the last year.

After such a large jump in price, given around half the companies in the United States' Medical Equipment industry have price-to-sales ratios (or "P/S") below 3.1x, you may consider ClearPoint Neuro as a stock to avoid entirely with its 12.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

We've discovered 1 warning sign about ClearPoint Neuro. View them for free.

See our latest analysis for ClearPoint Neuro

How Has ClearPoint Neuro Performed Recently?

ClearPoint Neuro certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, ClearPoint Neuro would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 31%. The strong recent performance means it was also able to grow revenue by 93% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 32% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.6% per annum, which is noticeably less attractive.

In light of this, it's understandable that ClearPoint Neuro's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On ClearPoint Neuro's P/S

ClearPoint Neuro's P/S has grown nicely over the last month thanks to a handy boost in the share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that ClearPoint Neuro maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Medical Equipment industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for ClearPoint Neuro 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.