RxSight, Inc. (NASDAQ:RXST) Stocks Shoot Up 30% But Its P/S Still Looks Reasonable

Despite an already strong run, RxSight, Inc. (NASDAQ:RXST) shares have been powering on, with a gain of 30% in the last thirty days. The last month tops off a massive increase of 234% in the last year.

After such a large jump in price, RxSight may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 21.2x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios under 3.4x and even P/S lower than 1.3x are not unusual. 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.

See our latest analysis for RxSight

How Has RxSight Performed Recently?

Recent times have been advantageous for RxSight as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as RxSight's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 85% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 37% each year as estimated by the eight analysts watching the company. That's shaping up to be materially higher than the 9.8% per annum growth forecast for the broader industry.

With this information, we can see why RxSight is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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

Our look into RxSight 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. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for RxSight that you should be aware of.

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