Take Care Before Jumping Onto NeoGenomics, Inc. (NASDAQ:NEO) Even Though It's 25% Cheaper

Unfortunately for some shareholders, the NeoGenomics, Inc. (NASDAQ:NEO) share price has dived 25% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 48% in that time.

Even after such a large drop in price, there still wouldn't be many who think NeoGenomics' price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in the United States' Healthcare industry is similar at about 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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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. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. This was backed up an excellent period prior to see revenue up by 38% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 12% per year over the next three years. With the industry only predicted to deliver 7.5% each year, the company is positioned for a stronger revenue result.

In light of this, it's curious that NeoGenomics' 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 NeoGenomics' P/S

Following NeoGenomics' share price tumble, its P/S is just clinging on to the industry median 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, NeoGenomics' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Having said that, be aware NeoGenomics is showing 2 warning signs in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.