Despite an already strong run, Apyx Medical Corporation (NASDAQ:APYX) shares have been powering on, with a gain of 28% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 13% over that time.

Even after such a large jump in price, Apyx Medical may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.2x and even P/S higher than 8x 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.

How Apyx Medical Has Been Performing

Recent times haven't been great for Apyx Medical as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as depressed as Apyx Medical's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 3.4%. The solid recent performance means it was also able to grow revenue by 28% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 5.6% each year as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 9.3% per year growth forecast for the broader industry.

In light of this, it's understandable that Apyx Medical's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Even after such a strong price move, Apyx Medical's P/S still trails the rest of the industry. 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 Apyx Medical's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Apyx Medical that 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).

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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.