Why Investors Shouldn't Be Surprised By Integra LifeSciences Holdings Corporation's (NASDAQ:IART) Low P/S

With a price-to-sales (or "P/S") ratio of 0.9x Integra LifeSciences Holdings Corporation (NASDAQ:IART) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.2x and even P/S higher than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Integra LifeSciences Holdings

How Has Integra LifeSciences Holdings Performed Recently?

With revenue growth that's inferior to most other companies of late, Integra LifeSciences Holdings has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Integra LifeSciences Holdings?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Integra LifeSciences Holdings' to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Likewise, not much has changed from three years ago as revenue have been stuck during that whole time. Therefore, it's fair to say that revenue growth has definitely eluded the company recently.

Looking ahead now, revenue is anticipated to climb by 6.2% each year during the coming three years according to the twelve analysts following the company. That's shaping up to be materially lower than the 9.1% per annum growth forecast for the broader industry.

In light of this, it's understandable that Integra LifeSciences Holdings' P/S sits below the majority of other companies. 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 Integra LifeSciences Holdings' P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Integra LifeSciences Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Integra LifeSciences Holdings (1 makes us a bit uncomfortable!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.