Investors Appear Satisfied With PROCEPT BioRobotics Corporation's (NASDAQ:PRCT) Prospects

PROCEPT BioRobotics Corporation's (NASDAQ:PRCT) price-to-sales (or "P/S") ratio of 12.9x may look like a poor investment opportunity when you consider close to half the companies in the Medical Equipment industry in the United States have P/S ratios below 3x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for PROCEPT BioRobotics

How Has PROCEPT BioRobotics Performed Recently?

Recent times have been advantageous for PROCEPT BioRobotics as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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Is There Enough Revenue Growth Forecasted For PROCEPT BioRobotics?

PROCEPT BioRobotics' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 65%. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 34% each year as estimated by the ten analysts watching the company. With the industry only predicted to deliver 9.4% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why PROCEPT BioRobotics' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

We've established that PROCEPT BioRobotics maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Medical Equipment industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for PROCEPT BioRobotics that you should be aware of.

If these risks are making you reconsider your opinion on PROCEPT BioRobotics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.