Market Might Still Lack Some Conviction On OptimizeRx Corporation (NASDAQ:OPRX) Even After 30% Share Price Boost

OptimizeRx Corporation (NASDAQ:OPRX) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 55% share price drop in the last twelve months.

In spite of the firm bounce in price, OptimizeRx may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1x, considering almost half of all companies in the Healthcare Services industry in the United States have P/S ratios greater than 2.3x and even P/S higher than 7x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for OptimizeRx

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

Recent times have been advantageous for OptimizeRx as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The Low P/S Ratio?

OptimizeRx's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 40% last year. Pleasingly, revenue has also lifted 54% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 10% over the next year. Meanwhile, the rest of the industry is forecast to expand by 9.3%, which is not materially different.

With this information, we find it odd that OptimizeRx is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On OptimizeRx's P/S

The latest share price surge wasn't enough to lift OptimizeRx's P/S close to the industry median. 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 seen that OptimizeRx currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Plus, you should also learn about these 3 warning signs we've spotted with OptimizeRx.

If you're unsure about the strength of OptimizeRx's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.