Many Still Looking Away From Pulmonx Corporation (NASDAQ:LUNG)

There wouldn't be many who think Pulmonx Corporation's (NASDAQ:LUNG) price-to-sales (or "P/S") ratio of 3.2x is worth a mention when the median P/S for the Medical Equipment industry in the United States is similar at about 3.4x. 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.

Check out our latest analysis for Pulmonx

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

With revenue growth that's superior to most other companies of late, Pulmonx 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.

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

Is There Some Revenue Growth Forecasted For Pulmonx?

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

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 78% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% per annum during the coming three years according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.3% per annum, which is noticeably less attractive.

In light of this, it's curious that Pulmonx's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Pulmonx's P/S

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.

Despite enticing revenue growth figures that outpace the industry, Pulmonx's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Pulmonx you should know about.

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