SANUWAVE Health, Inc. (NASDAQ:SNWV) Stocks Pounded By 25% But Not Lagging Industry On Growth Or Pricing

SANUWAVE Health, Inc. (NASDAQ:SNWV) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. Looking at the bigger picture, even after this poor month the stock is up 77% in the last year.

Even after such a large drop in price, you could still be forgiven for thinking SANUWAVE Health is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6.1x, considering almost half the companies in the United States' Medical Equipment industry have P/S ratios below 3.1x. 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.

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See our latest analysis for SANUWAVE Health

How SANUWAVE Health Has Been Performing

SANUWAVE Health certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is SANUWAVE Health's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 57%. The strong recent performance means it was also able to grow revenue by 160% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 31% over the next year. That's shaping up to be materially higher than the 10% growth forecast for the broader industry.

In light of this, it's understandable that SANUWAVE Health's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does SANUWAVE Health's P/S Mean For Investors?

A significant share price dive has done very little to deflate SANUWAVE Health's very lofty P/S. 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.

As we suspected, our examination of SANUWAVE Health'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. It's hard to see the share price falling strongly in the near future under these circumstances.

You need to take note of risks, for example - SANUWAVE Health has 2 warning signs (and 1 which is potentially serious) we think you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.