Envista Holdings Corporation's (NYSE:NVST) Prospects Need A Boost To Lift Shares

Envista Holdings Corporation's (NYSE:NVST) price-to-sales (or "P/S") ratio of 1.5x 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 3.2x and even P/S above 8x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Envista Holdings

What Does Envista Holdings' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Envista Holdings' 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. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Envista Holdings?

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

Retrospectively, the last year delivered a frustrating 3.0% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 3.3% per annum as estimated by the analysts watching the company. With the industry predicted to deliver 9.2% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Envista Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Envista Holdings' 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. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Envista Holdings with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Envista Holdings, 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.