Further Upside For electroCore, Inc. (NASDAQ:ECOR) Shares Could Introduce Price Risks After 43% Bounce

The electroCore, Inc. (NASDAQ:ECOR) share price has done very well over the last month, posting an excellent gain of 43%. The last 30 days bring the annual gain to a very sharp 27%.

Although its price has surged higher, there still wouldn't be many who think electroCore's price-to-sales (or "P/S") ratio of 2.2x is worth a mention when the median P/S in the United States' Medical Equipment industry is similar at about 2.7x. 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.

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Check out our latest analysis for electroCore

What Does electroCore's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, electroCore has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For electroCore?

In order to justify its P/S ratio, electroCore would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 42%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 33% per year as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 9.9% per annum growth forecast for the broader industry.

With this information, we find it interesting that electroCore is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

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

Looking at electroCore's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 4 warning signs we've spotted with electroCore.

If these risks are making you reconsider your opinion on electroCore, 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.