Sight Sciences, Inc. (NASDAQ:SGHT) Stock Catapults 46% Though Its Price And Business Still Lag The Industry

Sight Sciences, Inc. (NASDAQ:SGHT) shares have had a really impressive month, gaining 46% after a shaky period beforehand. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 71% share price drop in the last twelve months.

Even after such a large jump in price, Sight Sciences may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.9x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.1x and even P/S higher than 8x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Sight Sciences

How Sight Sciences Has Been Performing

Recent times have been advantageous for Sight Sciences 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is Sight Sciences' Revenue Growth Trending?

Sight Sciences' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. Pleasingly, revenue has also lifted 200% 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.

Shifting to the future, estimates from the six analysts covering the company suggest revenue growth is heading into negative territory, declining 4.3% over the next year. That's not great when the rest of the industry is expected to grow by 8.7%.

With this in consideration, we find it intriguing that Sight Sciences' P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Sight Sciences' P/S

The latest share price surge wasn't enough to lift Sight Sciences' P/S close to the industry median. 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.

As we suspected, our examination of Sight Sciences' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, Sight Sciences' poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

You should always think about risks. Case in point, we've spotted 2 warning signs for Sight Sciences you should be aware of, and 1 of them is significant.

If you're unsure about the strength of Sight Sciences' 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.