Revenues Working Against Cutera, Inc.'s (NASDAQ:CUTR) Share Price Following 35% Dive

Cutera, Inc. (NASDAQ:CUTR) shareholders that were waiting for something to happen have been dealt a blow with a 35% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 93% loss during that time.

After such a large drop in price, Cutera may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.4x and even P/S higher than 8x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Cutera

How Cutera Has Been Performing

Cutera hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Cutera would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 8.2% decrease to the company's top line. Still, the latest three year period has seen an excellent 54% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 4.6% per year as estimated by the five analysts watching the company. That's shaping up to be materially lower than the 9.5% per year growth forecast for the broader industry.

With this in consideration, its clear as to why Cutera's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Cutera's P/S

Shares in Cutera have plummeted and its P/S has followed suit. 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 Cutera's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 5 warning signs for Cutera (of which 3 are concerning!) you should know about.

If these risks are making you reconsider your opinion on Cutera, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.