Inogen, Inc. (NASDAQ:INGN) Held Back By Insufficient Growth Even After Shares Climb 25%

Despite an already strong run, Inogen, Inc. (NASDAQ:INGN) shares have been powering on, with a gain of 25% in the last thirty days. But the last month did very little to improve the 72% share price decline over the last year.

In spite of the firm bounce in price, Inogen's price-to-sales (or "P/S") ratio of 0.5x might still make it look like a strong buy right now compared to the wider Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 3.3x and even P/S above 8x are quite common. 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.

See our latest analysis for Inogen

What Does Inogen's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Inogen's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Inogen's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 10%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 0.5% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.7%, which is noticeably more attractive.

In light of this, it's understandable that Inogen's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Inogen's P/S

Inogen's recent share price jump still sees fails to bring its P/S alongside the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Inogen's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Inogen 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.