The Journey Medical Corporation (NASDAQ:DERM) share price has done very well over the last month, posting an excellent gain of 55%. The last month tops off a massive increase of 146% in the last year.

In spite of the firm bounce in price, Journey Medical's price-to-sales (or "P/S") ratio of 1.4x might still make it look like a buy right now compared to the Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios above 2.8x and even P/S above 13x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

How Has Journey Medical Performed Recently?

Recent times have been advantageous for Journey Medical as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think Journey Medical's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Journey Medical's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 28% last year. Pleasingly, revenue has also lifted 79% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 1.1% per annum over the next three years. With the industry predicted to deliver 17% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Journey Medical's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Journey Medical's P/S Mean For Investors?

Journey Medical's stock price has surged recently, but its but its P/S still remains modest. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Journey Medical maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Journey Medical (including 1 which is concerning).

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

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.

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