Elutia Inc. (NASDAQ:ELUT) Held Back By Insufficient Growth Even After Shares Climb 26%

Elutia Inc. (NASDAQ:ELUT) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. The last month tops off a massive increase of 148% in the last year.

Although its price has surged higher, Elutia's price-to-sales (or "P/S") ratio of 5.8x might still make it look like a buy right now compared to the Biotechs industry in the United States, where around half of the companies have P/S ratios above 10.3x and even P/S above 60x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Elutia

What Does Elutia's Recent Performance Look Like?

Elutia hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Elutia?

The only time you'd be truly comfortable seeing a P/S as low as Elutia's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 2.7% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 49% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 27% over the next year. With the industry predicted to deliver 77% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Elutia's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

The latest share price surge wasn't enough to lift Elutia's P/S close to the industry median. 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.

As expected, our analysis of Elutia's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Elutia (1 can't be ignored!) that we have uncovered.

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