Insufficient Growth At Trinity Biotech plc (NASDAQ:TRIB) Hampers Share Price

Trinity Biotech plc's (NASDAQ:TRIB) price-to-sales (or "P/S") ratio of 0.5x might make it look like a strong buy right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 3.8x and even P/S above 9x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Trinity Biotech

What Does Trinity Biotech's P/S Mean For Shareholders?

Trinity Biotech could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Trinity Biotech?

The only time you'd be truly comfortable seeing a P/S as depressed as Trinity Biotech's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 20% decrease to the company's top line. As a result, revenue from three years ago have also fallen 17% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 4.4% during the coming year according to the only analyst following the company. Meanwhile, the broader industry is forecast to expand by 8.4%, which paints a poor picture.

In light of this, it's understandable that Trinity Biotech's P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What Does Trinity Biotech's P/S Mean For Investors?

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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Trinity Biotech's P/S is on the lower end of the spectrum. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Trinity Biotech that you should be aware 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.