What You Can Learn From PROCEPT BioRobotics Corporation's (NASDAQ:PRCT) P/S After Its 34% Share Price Crash

Explore PROCEPT BioRobotics's Fair Values from the Community and select yours

PROCEPT BioRobotics Corporation (NASDAQ:PRCT) shareholders that were waiting for something to happen have been dealt a blow with a 34% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 37% in that time.

Although its price has dipped substantially, given around half the companies in the United States' Medical Equipment industry have price-to-sales ratios (or "P/S") below 2.6x, you may still consider PROCEPT BioRobotics as a stock to avoid entirely with its 7.7x P/S ratio. 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.

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View our latest analysis for PROCEPT BioRobotics

How Has PROCEPT BioRobotics Performed Recently?

PROCEPT BioRobotics certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

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.

Taking a look back first, we see that the company grew revenue by an impressive 56% last year. This great performance means it was also able to deliver immense revenue growth 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 eleven analysts covering the company suggest revenue should grow by 27% each year over the next three years. That's shaping up to be materially higher than the 9.6% each year growth forecast for the broader industry.

With this in mind, it's not hard to understand why PROCEPT BioRobotics' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does PROCEPT BioRobotics' P/S Mean For Investors?

Even after such a strong price drop, PROCEPT BioRobotics' P/S still exceeds the industry median significantly. 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.

Our look into PROCEPT BioRobotics shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

Plus, you should also learn about this 1 warning sign we've spotted with PROCEPT BioRobotics.

If these risks are making you reconsider your opinion on PROCEPT BioRobotics, 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.