What Mirion Technologies, Inc.'s (NYSE:MIR) P/S Is Not Telling You

When close to half the companies in the Electronic industry in the United States have price-to-sales ratios (or "P/S") below 1.7x, you may consider Mirion Technologies, Inc. (NYSE:MIR) as a stock to potentially avoid with its 2.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Mirion Technologies

How Has Mirion Technologies Performed Recently?

Mirion Technologies certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. 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 Mirion Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Mirion Technologies would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a decent 8.3% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 34% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 6.3% over the next year. Meanwhile, the rest of the industry is forecast to expand by 9.0%, which is noticeably more attractive.

With this in consideration, we believe it doesn't make sense that Mirion Technologies' P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It comes as a surprise to see Mirion Technologies trade at such a high P/S given the revenue forecasts look less than stellar. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. At these price levels, investors should remain cautious, particularly if things don't improve.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Mirion Technologies you should know about.

If you're unsure about the strength of Mirion Technologies' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.