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DENTSPLY SIRONA Inc.'s (NASDAQ:XRAY) Prospects Need A Boost To Lift Shares

DENTSPLY SIRONA Inc.'s (NASDAQ:XRAY) price-to-sales (or "P/S") ratio of 2x 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 3.6x 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.

See our latest analysis for DENTSPLY SIRONA

ps-multiple-vs-industry
ps-multiple-vs-industry

What Does DENTSPLY SIRONA's Recent Performance Look Like?

DENTSPLY SIRONA could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

How Is DENTSPLY SIRONA's Revenue Growth Trending?

DENTSPLY SIRONA's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.8%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 1.5% during the coming year according to the analysts following the company. That's shaping up to be materially lower than the 8.3% growth forecast for the broader industry.

With this information, we can see why DENTSPLY SIRONA is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On DENTSPLY SIRONA's P/S

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 expected, our analysis of DENTSPLY SIRONA's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for DENTSPLY SIRONA you should be aware 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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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