SI-BONE, Inc.'s (NASDAQ:SIBN) P/S Is On The Mark

SI-BONE, Inc.'s (NASDAQ:SIBN) price-to-sales (or "P/S") ratio of 4.8x might make it look like a sell right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios below 3.6x and even P/S below 1.3x 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 as high as it is.

Check out our latest analysis for SI-BONE

How Has SI-BONE Performed Recently?

Recent times have been advantageous for SI-BONE 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 SI-BONE's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The High P/S?

The only time you'd be truly comfortable seeing a P/S as high as SI-BONE's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 31% gain to the company's top line. Pleasingly, revenue has also lifted 89% 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 16% per year during the coming three years according to the nine analysts following the company. With the industry only predicted to deliver 10.0% per annum, 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.

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

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. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for SI-BONE that you should be aware of.

If you're unsure about the strength of SI-BONE'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.