Slammed 49% Novo Integrated Sciences, Inc. (NASDAQ:NVOS) Screens Well Here But There Might Be A Catch

Novo Integrated Sciences, Inc. (NASDAQ:NVOS) shares have retraced a considerable 49% in the last month, reversing a fair amount of their solid recent performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 63% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Novo Integrated Sciences' P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in the United States is also close to 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Novo Integrated Sciences

What Does Novo Integrated Sciences' P/S Mean For Shareholders?

Revenue has risen firmly for Novo Integrated Sciences recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Novo Integrated Sciences' earnings, revenue and cash flow.

How Is Novo Integrated Sciences' Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 92% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 7.4%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Novo Integrated Sciences is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Novo Integrated Sciences' P/S

Novo Integrated Sciences' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To our surprise, Novo Integrated Sciences revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

You need to take note of risks, for example - Novo Integrated Sciences has 4 warning signs (and 3 which are a bit unpleasant) we think you should know about.

If these risks are making you reconsider your opinion on Novo Integrated Sciences, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com