Yahoo Finance Lacklustre Performance Is Driving Bausch + Lomb Corporation's (NYSE:BLCO) Low P/S
With a price-to-sales (or "P/S") ratio of 1.5x Bausch + Lomb Corporation (NYSE:BLCO) may be sending very bullish signals at the moment, given that almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.7x and even P/S higher than 9x 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 so limited.
Check out our latest analysis for Bausch + Lomb
What Does Bausch + Lomb's P/S Mean For Shareholders?
Bausch + Lomb could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Bausch + Lomb will help you uncover what's on the horizon.
How Is Bausch + Lomb's Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as depressed as Bausch + Lomb's is when the company's growth is on track to lag the industry decidedly.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Likewise, not much has changed from three years ago as revenue have been stuck during that whole time. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.
Looking ahead now, revenue is anticipated to climb by 4.1% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 8.9% per year, which is noticeably more attractive.
With this in consideration, its clear as to why Bausch + Lomb's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Bottom Line On Bausch + Lomb's P/S
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 we suspected, our examination of Bausch + Lomb's analyst forecasts revealed that its inferior revenue outlook is contributing 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. The company will need a change of fortune to justify the P/S rising higher in the future.
You always need to take note of risks, for example - Bausch + Lomb has 1 warning sign we think you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
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