Many Still Looking Away From TELA Bio, Inc. (NASDAQ:TELA)

It's not a stretch to say that TELA Bio, Inc.'s (NASDAQ:TELA) price-to-sales (or "P/S") ratio of 2.9x right now seems quite "middle-of-the-road" for companies in the Medical Equipment industry in the United States, where the median P/S ratio is around 3.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for TELA Bio

What Does TELA Bio's Recent Performance Look Like?

Recent times have been advantageous for TELA Bio as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think TELA Bio's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, TELA Bio would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 39%. The strong recent performance means it was also able to grow revenue by 205% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 31% each year during the coming three years according to the five analysts following the company. That's shaping up to be materially higher than the 9.5% per annum growth forecast for the broader industry.

With this in consideration, we find it intriguing that TELA Bio's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From TELA Bio's P/S?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that TELA Bio currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for TELA Bio that you should be aware of.

If you're unsure about the strength of TELA Bio'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.