ZimVie Inc. (NASDAQ:ZIMV) Stock Catapults 93% Though Its Price And Business Still Lag The Industry

ZimVie Inc. (NASDAQ:ZIMV) shareholders would be excited to see that the share price has had a great month, posting a 93% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 86% in the last year.

In spite of the firm bounce in price, ZimVie may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.1x and even P/S higher than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for ZimVie

What Does ZimVie's Recent Performance Look Like?

While the industry has experienced revenue growth lately, ZimVie's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

How Is ZimVie's Revenue Growth Trending?

ZimVie's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.8%. As a result, revenue from three years ago have also fallen 3.3% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue growth is heading into negative territory, declining 1.8% over the next year. That's not great when the rest of the industry is expected to grow by 8.7%.

With this information, we are not surprised that ZimVie is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

Shares in ZimVie have risen appreciably however, its P/S is still subdued. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that ZimVie's P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for ZimVie (of which 1 is a bit concerning!) you should know about.

If you're unsure about the strength of ZimVie'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.