Yahoo Finance Cambridge Cognition Holdings Plc's (LON:COG) Shares Not Telling The Full Story
With a price-to-sales (or "P/S") ratio of 1.3x Cambridge Cognition Holdings Plc (LON:COG) may be sending bullish signals at the moment, given that almost half of all the Healthcare Services companies in the United Kingdom have P/S ratios greater than 3.2x and even P/S higher than 7x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
Check out our latest analysis for Cambridge Cognition Holdings
How Has Cambridge Cognition Holdings Performed Recently?
Recent times have been advantageous for Cambridge Cognition Holdings as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on Cambridge Cognition Holdings will help you uncover what's on the horizon.
How Is Cambridge Cognition Holdings' Revenue Growth Trending?
In order to justify its P/S ratio, Cambridge Cognition Holdings would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The latest three year period has also seen an excellent 117% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 17% over the next year. With the industry only predicted to deliver 6.6%, the company is positioned for a stronger revenue result.
With this information, we find it odd that Cambridge Cognition Holdings is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Final Word
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.
To us, it seems Cambridge Cognition Holdings currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.
We don't want to rain on the parade too much, but we did also find 2 warning signs for Cambridge Cognition Holdings that you need to be mindful of.
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.
