Revenues Tell The Story For RxSight, Inc. (NASDAQ:RXST) As Its Stock Soars 28%

Those holding RxSight, Inc. (NASDAQ:RXST) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last month tops off a massive increase of 139% in the last year.

Since its price has surged higher, you could be forgiven for thinking RxSight is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 13.4x, considering almost half the companies in the United States' Medical Equipment industry have P/S ratios below 2.9x. 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.

Check out our latest analysis for RxSight

What Does RxSight's Recent Performance Look Like?

RxSight 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.

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

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like RxSight's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 85% 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.

Turning to the outlook, the next year should generate growth of 45% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.6%, which is noticeably less attractive.

With this in mind, it's not hard to understand why RxSight's 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 RxSight's P/S

The strong share price surge has lead to RxSight's P/S soaring as well. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into RxSight shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

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

If you're unsure about the strength of RxSight'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.