Allurion Technologies Inc. (NYSE:ALUR) shareholders that were waiting for something to happen have been dealt a blow with a 42% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 91% loss during that time.

After such a large drop in price, considering around half the companies operating in the United States' Consumer Services industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider Allurion Technologies as an solid investment opportunity with its 0.7x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How Has Allurion Technologies Performed Recently?

While the industry has experienced revenue growth lately, Allurion Technologies' revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Allurion Technologies.

How Is Allurion Technologies' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 46%. The last three years don't look nice either as the company has shrunk revenue by 9.1% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 12% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 13%, which is not materially different.

With this in consideration, we find it intriguing that Allurion Technologies' P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Allurion Technologies' P/S Mean For Investors?

Allurion Technologies' recently weak share price has pulled its P/S back below other Consumer Services companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've seen that Allurion Technologies currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 6 warning signs for Allurion Technologies (2 are concerning!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.