Yahoo Finance Potential Upside For Cambridge Cognition Holdings Plc (LON:COG) Not Without Risk
With a price-to-sales (or "P/S") ratio of 2.5x 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 3.3x 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 limited.
See our latest analysis for Cambridge Cognition Holdings
How Cambridge Cognition Holdings Has Been Performing
There hasn't been much to differentiate Cambridge Cognition Holdings' and the industry's revenue growth lately. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. Those who are bullish on Cambridge Cognition Holdings will be hoping that this isn't the case.
Keen to find out how analysts think Cambridge Cognition Holdings' 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 Low P/S?
Cambridge Cognition Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 25%. The strong recent performance means it was also able to grow revenue by 150% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 16% per annum as estimated by the dual analysts watching the company. That's shaping up to be similar to the 17% each year growth forecast for the broader industry.
With this in consideration, we find it intriguing that Cambridge Cognition Holdings' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
What Does Cambridge Cognition Holdings' P/S Mean For Investors?
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
It looks to us like the P/S figures for Cambridge Cognition Holdings remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.
Before you take the next step, you should know about the 1 warning sign for Cambridge Cognition Holdings that we have uncovered.
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).
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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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