The Price Is Right For CVRx, Inc. (NASDAQ:CVRX) Even After Diving 25%

CVRx, Inc. (NASDAQ:CVRX) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. Looking at the bigger picture, even after this poor month the stock is up 83% in the last year.

Even after such a large drop in price, CVRx may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 10.6x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios under 3.5x and even P/S lower than 1.4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for CVRx

What Does CVRx's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, CVRx has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is CVRx's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as CVRx's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 75% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 39% per year over the next three years. That's shaping up to be materially higher than the 9.5% per year growth forecast for the broader industry.

With this in mind, it's not hard to understand why CVRx'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.

What We Can Learn From CVRx's P/S?

Even after such a strong price drop, CVRx's P/S still exceeds the industry median significantly. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into CVRx shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

Before you take the next step, you should know about the 2 warning signs for CVRx that we have uncovered.

If you're unsure about the strength of CVRx's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.