Investors Appear Satisfied With PROCEPT BioRobotics Corporation's (NASDAQ:PRCT) Prospects As Shares Rocket 28%

PROCEPT BioRobotics Corporation (NASDAQ:PRCT) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. The annual gain comes to 157% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, PROCEPT BioRobotics may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 23.3x, when you consider almost half of the companies in the Medical Equipment industry in the United States have P/S ratios under 3.3x and even P/S lower than 1.2x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for PROCEPT BioRobotics

What Does PROCEPT BioRobotics' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, PROCEPT BioRobotics has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

PROCEPT BioRobotics' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 74%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 36% each year over the next three years. With the industry only predicted to deliver 10% each year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why PROCEPT BioRobotics' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On PROCEPT BioRobotics' P/S

Shares in PROCEPT BioRobotics have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that PROCEPT BioRobotics maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Medical Equipment 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.

You always need to take note of risks, for example - PROCEPT BioRobotics has 2 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.