CorMedix Inc.'s (NASDAQ:CRMD) P/S Is On The Mark

When you see that almost half of the companies in the Pharmaceuticals industry in the United States have price-to-sales ratios (or "P/S") below 2.7x, CorMedix Inc. (NASDAQ:CRMD) looks to be giving off strong sell signals with its 43.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for CorMedix

How Has CorMedix Performed Recently?

Recent times have been advantageous for CorMedix as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is CorMedix's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as CorMedix's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an explosive gain to the company's top line. The amazing performance means it was also able to deliver huge revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 172% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 20% per annum, which is noticeably less attractive.

In light of this, it's understandable that CorMedix's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does CorMedix's P/S Mean For Investors?

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.

As we suspected, our examination of CorMedix's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

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

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.