Enovis Corporation (NYSE:ENOV) Might Not Be As Mispriced As It Looks

Enovis Corporation's (NYSE:ENOV) price-to-sales (or "P/S") ratio of 1.8x might make it look like a buy right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 3.1x and even P/S above 7x are quite common. 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 Enovis

How Enovis Has Been Performing

Enovis' revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so 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 Enovis.

Is There Any Revenue Growth Forecasted For Enovis?

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

Retrospectively, the last year delivered a decent 9.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 52% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 10% per annum growth forecast for the broader industry.

In light of this, it's peculiar that Enovis' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Enovis' P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Enovis' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Enovis with six simple checks will allow you to discover any risks that could be an issue.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.