iCAD, Inc. (NASDAQ:ICAD) Stock's 26% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Simply Wall St · 04/09 10:28

iCAD, Inc. (NASDAQ:ICAD) shares have had a horrible month, losing 26% after a relatively good period beforehand. Longer-term shareholders would now have taken a real hit with the stock declining 7.8% in the last year.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about iCAD's P/S ratio of 2.3x, since the median price-to-sales (or "P/S") ratio for the Healthcare Services industry in the United States is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for iCAD

ps-multiple-vs-industry
NasdaqCM:ICAD Price to Sales Ratio vs Industry April 9th 2025

How iCAD Has Been Performing

Recent times haven't been great for iCAD 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. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For iCAD?

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

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. Still, lamentably revenue has fallen 42% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 17% per annum over the next three years. That's shaping up to be materially higher than the 11% per year growth forecast for the broader industry.

In light of this, it's curious that iCAD's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Following iCAD's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

Looking at iCAD's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for iCAD that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).