Fewer Investors Than Expected Jumping On Paragon 28, Inc. (NYSE:FNA)

With a median price-to-sales (or "P/S") ratio of close to 3.5x in the Medical Equipment industry in the United States, you could be forgiven for feeling indifferent about Paragon 28, Inc.'s (NYSE:FNA) P/S ratio of 4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Paragon 28

How Paragon 28 Has Been Performing

With revenue growth that's superior to most other companies of late, Paragon 28 has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Paragon 28's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Paragon 28's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Paragon 28's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an excellent 75% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 15% as estimated by the six analysts watching the company. With the industry only predicted to deliver 8.6%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Paragon 28's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does Paragon 28's P/S Mean For Investors?

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.

Looking at Paragon 28's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Before you take the next step, you should know about the 3 warning signs for Paragon 28 (1 is a bit concerning!) that we have uncovered.

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.