Insufficient Growth At DENTSPLY SIRONA Inc. (NASDAQ:XRAY) Hampers Share Price

With a price-to-sales (or "P/S") ratio of 1.4x DENTSPLY SIRONA Inc. (NASDAQ:XRAY) may be sending bullish signals at the moment, given that almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.2x and even P/S higher than 7x 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.

View our latest analysis for DENTSPLY SIRONA

How DENTSPLY SIRONA Has Been Performing

DENTSPLY SIRONA could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, DENTSPLY SIRONA would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period was better as it's delivered a decent 13% overall rise in revenue. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 3.0% per annum during the coming three years according to the analysts following the company. With the industry predicted to deliver 11% growth each year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that DENTSPLY SIRONA's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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 DENTSPLY SIRONA's analyst forecasts revealed that its inferior revenue outlook is contributing 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with DENTSPLY SIRONA, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on DENTSPLY SIRONA, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.