Tandem Diabetes Care, Inc. (NASDAQ:TNDM) shares have had a horrible month, losing 29% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 74%, which is great even in a bull market.

In spite of the heavy fall in price, there still wouldn't be many who think Tandem Diabetes Care's price-to-sales (or "P/S") ratio of 2.6x is worth a mention when the median P/S in the United States' Medical Equipment industry is similar at about 3.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

How Has Tandem Diabetes Care Performed Recently?

Recent times haven't been great for Tandem Diabetes Care as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Tandem Diabetes Care would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period has seen an excellent 32% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Turning to the outlook, the next three years should generate growth of 13% per year as estimated by the analysts watching the company. That's shaping up to be materially higher than the 9.2% each year growth forecast for the broader industry.

With this information, we find it interesting that Tandem Diabetes Care is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Tandem Diabetes Care's P/S Mean For Investors?

Tandem Diabetes Care's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, Tandem Diabetes Care's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Tandem Diabetes Care you should know about.

If these risks are making you reconsider your opinion on Tandem Diabetes Care, 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.