Why Investors Shouldn't Be Surprised By Artivion, Inc.'s (NYSE:AORT) P/S

It's not a stretch to say that Artivion, Inc.'s (NYSE:AORT) price-to-sales (or "P/S") ratio of 3.3x 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 3.4x. 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.

Check out our latest analysis for Artivion

How Artivion Has Been Performing

There hasn't been much to differentiate Artivion's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. Those who are bullish on Artivion will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

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

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Pleasingly, revenue has also lifted 34% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 9.3% over the next year. With the industry predicted to deliver 9.1% growth , the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Artivion's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

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.

A Artivion's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Medical Equipment industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Artivion that you need to be mindful 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.