Investors Appear Satisfied With ClearPoint Neuro, Inc.'s (NASDAQ:CLPT) Prospects As Shares Rocket 28%

Despite an already strong run, ClearPoint Neuro, Inc. (NASDAQ:CLPT) shares have been powering on, with a gain of 28% in the last thirty days. The last month tops off a massive increase of 145% in the last year.

Following the firm bounce in price, ClearPoint Neuro may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 12.4x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios under 3.4x and even P/S lower than 1.3x are not unusual. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for ClearPoint Neuro

How ClearPoint Neuro Has Been Performing

Recent times have been advantageous for ClearPoint Neuro as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

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

There's an inherent assumption that a company should far outperform the industry for P/S ratios like ClearPoint Neuro's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 29% gain to the company's top line. The latest three year period has also seen an excellent 91% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 25% 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 in mind, it's not hard to understand why ClearPoint Neuro's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

The strong share price surge has lead to ClearPoint Neuro's P/S soaring as well. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of ClearPoint Neuro's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You always need to take note of risks, for example - ClearPoint Neuro 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.