The Market Lifts Rockwell Medical, Inc. (NASDAQ:RMTI) Shares 28% But It Can Do More

Rockwell Medical, Inc. (NASDAQ:RMTI) shares have continued their recent momentum with a 28% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 76%.

In spite of the firm bounce in price, Rockwell Medical's price-to-sales (or "P/S") ratio of 1.2x might still make it look like a buy right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 3.2x and even P/S above 7x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Rockwell Medical

How Rockwell Medical Has Been Performing

Recent times have been advantageous for Rockwell Medical as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 out of favour.

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

How Is Rockwell Medical's Revenue Growth Trending?

In order to justify its P/S ratio, Rockwell Medical would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. Pleasingly, revenue has also lifted 55% 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.

Turning to the outlook, the next year should generate growth of 11% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 9.0%, which is not materially different.

With this in consideration, we find it intriguing that Rockwell Medical's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Rockwell Medical's P/S Mean For Investors?

Despite Rockwell Medical's share price climbing recently, its P/S still lags most other companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It looks to us like the P/S figures for Rockwell Medical remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Having said that, be aware Rockwell Medical is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Rockwell Medical'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.