electroCore, Inc. (NASDAQ:ECOR) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. The recent drop has obliterated the annual return, with the share price now down 5.8% over that longer period.

Following the heavy fall in price, electroCore may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.5x, considering almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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See our latest analysis for electroCore

What Does electroCore's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, electroCore has been doing relatively well. 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on electroCore will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, electroCore would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 30% gain to the company's top line. Pleasingly, revenue has also lifted 294% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 33% per year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 9.2% per year growth forecast for the broader industry.

With this information, we find it odd that electroCore is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From electroCore's P/S?

The southerly movements of electroCore's shares means its P/S is now sitting at a pretty low level. 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.

A look at electroCore's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 4 warning signs for electroCore 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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