NeoGenomics, Inc.'s (NASDAQ:NEO) Stock Retreats 28% But Revenues Haven't Escaped The Attention Of Investors

Unfortunately for some shareholders, the NeoGenomics, Inc. (NASDAQ:NEO) share price has dived 28% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 36% share price drop.

In spite of the heavy fall in price, when almost half of the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1.1x, you may still consider NeoGenomics as a stock probably not worth researching with its 2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for NeoGenomics

What Does NeoGenomics' P/S Mean For Shareholders?

There hasn't been much to differentiate NeoGenomics' and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For NeoGenomics?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. The latest three year period has also seen an excellent 36% 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.

Turning to the outlook, the next three years should generate growth of 12% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.3% per annum, which is noticeably less attractive.

In light of this, it's understandable that NeoGenomics' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On NeoGenomics' P/S

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

We've established that NeoGenomics maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Healthcare industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for NeoGenomics that you need to be mindful of.

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