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    Take Care Before Jumping Onto SofWave Medical Ltd. (TLV:SOFW) Even Though It's 26% Cheaper

    Simply Wall St·04/08/2025 04:58:44
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    SofWave Medical Ltd. (TLV:SOFW) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 31% share price drop.

    Since its price has dipped substantially, SofWave Medical may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.1x, considering almost half of all companies in the Medical Equipment industry in Israel have P/S ratios greater than 3x and even P/S higher than 9x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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    Check out our latest analysis for SofWave Medical

    ps-multiple-vs-industry
    TASE:SOFW Price to Sales Ratio vs Industry April 8th 2025

    How SofWave Medical Has Been Performing

    SofWave Medical has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on SofWave Medical will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

    Although there are no analyst estimates available for SofWave Medical, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

    What Are Revenue Growth Metrics Telling Us About The Low P/S?

    SofWave Medical's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

    Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. Pleasingly, revenue has also lifted 173% 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.

    When compared to the industry's one-year growth forecast of 19%, the most recent medium-term revenue trajectory is noticeably more alluring

    With this in mind, we find it intriguing that SofWave Medical's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

    What We Can Learn From SofWave Medical's P/S?

    SofWave Medical's recently weak share price has pulled its P/S back below other Medical Equipment companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

    We're very surprised to see SofWave Medical currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

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

    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.