SI-BONE, Inc. (NASDAQ:SIBN) Looks Just Right With A 26% Price Jump

SI-BONE, Inc. (NASDAQ:SIBN) shareholders have had their patience rewarded with a 26% share price jump in the last month. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 10.0% over the last year.

Since its price has surged higher, SI-BONE may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 4.5x, since almost half of all companies in the Medical Equipment in the United States have P/S ratios under 3.5x and even P/S lower than 1.2x 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 as high as it is.

Check out our latest analysis for SI-BONE

What Does SI-BONE's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, SI-BONE has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is SI-BONE's Revenue Growth Trending?

In order to justify its P/S ratio, SI-BONE would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Pleasingly, revenue has also lifted 80% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 19% during the coming year according to the nine analysts following the company. With the industry only predicted to deliver 9.3%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why SI-BONE's 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.

The Key Takeaway

SI-BONE shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of SI-BONE's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

We don't want to rain on the parade too much, but we did also find 2 warning signs for SI-BONE that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.