KORU Medical Systems, Inc.'s (NASDAQ:KRMD) Stock Retreats 27% But Revenues Haven't Escaped The Attention Of Investors

KORU Medical Systems, Inc. (NASDAQ:KRMD) shares have had a horrible month, losing 27% after a relatively good period beforehand. Looking at the bigger picture, even after this poor month the stock is up 56% in the last year.

In spite of the heavy fall in price, KORU Medical Systems may still be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 4.6x, since almost half of all companies in the Medical Equipment in the United States have P/S ratios under 3.3x and even P/S lower than 1.2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for KORU Medical Systems

How Has KORU Medical Systems Performed Recently?

KORU Medical Systems' revenue growth of late has been pretty similar to most other companies. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, KORU Medical Systems would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. The latest three year period has also seen an excellent 52% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 18% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 9.4% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why KORU Medical Systems' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From KORU Medical Systems' P/S?

There's still some elevation in KORU Medical Systems' P/S, even if the same can't be said for its share price recently. 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.

We've established that KORU Medical Systems maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Medical Equipment industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for KORU Medical Systems with six simple checks.

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.