DENTSPLY SIRONA Inc. (NASDAQ:XRAY) Looks Inexpensive But Perhaps Not Attractive Enough

You may think that with a price-to-sales (or "P/S") ratio of 1.4x DENTSPLY SIRONA Inc. (NASDAQ:XRAY) is a stock worth checking out, seeing as almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.3x and even P/S higher than 7x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for DENTSPLY SIRONA

How DENTSPLY SIRONA Has Been Performing

While the industry has experienced revenue growth lately, DENTSPLY SIRONA's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still 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.

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

Is There Any Revenue Growth Forecasted For DENTSPLY SIRONA?

There's an inherent assumption that a company should underperform the industry for P/S ratios like DENTSPLY SIRONA's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 1.0% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 4.1% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 3.1% per annum as estimated by the analysts watching the company. That's shaping up to be materially lower than the 9.2% per year growth forecast for the broader industry.

With this information, we can see why DENTSPLY SIRONA is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From DENTSPLY SIRONA's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of DENTSPLY SIRONA's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about this 1 warning sign we've spotted with DENTSPLY SIRONA.

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.