Investors Don't See Light At End Of OraSure Technologies, Inc.'s (NASDAQ:OSUR) Tunnel And Push Stock Down 26%

OraSure Technologies, Inc. (NASDAQ:OSUR) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 60% loss during that time.

After such a large drop in price, OraSure Technologies may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.2x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.6x and even P/S higher than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for OraSure Technologies

What Does OraSure Technologies' Recent Performance Look Like?

OraSure Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think OraSure Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

How Is OraSure Technologies' Revenue Growth Trending?

OraSure Technologies' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 54%. The last three years don't look nice either as the company has shrunk revenue by 20% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 5.5% each year during the coming three years according to the five analysts following the company. Meanwhile, the broader industry is forecast to expand by 9.4% per annum, which paints a poor picture.

With this information, we are not surprised that OraSure Technologies is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What Does OraSure Technologies' P/S Mean For Investors?

Shares in OraSure Technologies have plummeted and its P/S has followed suit. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's clear to see that OraSure Technologies maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, OraSure Technologies' poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for OraSure Technologies with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on OraSure Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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

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.