Sensus Healthcare, Inc. (NASDAQ:SRTS) Stock's 27% Dive Might Signal An Opportunity But It Requires Some Scrutiny

To the annoyance of some shareholders, Sensus Healthcare, Inc. (NASDAQ:SRTS) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Longer-term, the stock has been solid despite a difficult 30 days, gaining 14% in the last year.

Since its price has dipped substantially, Sensus Healthcare may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.6x and even P/S higher than 8x 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 limited.

Check out our latest analysis for Sensus Healthcare

How Sensus Healthcare Has Been Performing

With revenue growth that's superior to most other companies of late, Sensus Healthcare has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 71% gain to the company's top line. The latest three year period has also seen an excellent 55% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 15% per year as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 9.5% per annum growth forecast for the broader industry.

In light of this, it's peculiar that Sensus Healthcare's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Sensus Healthcare's P/S Mean For Investors?

The southerly movements of Sensus Healthcare's shares means its P/S is now sitting at a pretty low level. 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.

Sensus Healthcare's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Sensus Healthcare, and understanding them should be part of your investment process.

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.