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Why Investors Shouldn't Be Surprised By Treace Medical Concepts, Inc.'s (NASDAQ:TMCI) Low P/S

Simply Wall St · 6d ago

You may think that with a price-to-sales (or "P/S") ratio of 0.9x Treace Medical Concepts, Inc. (NASDAQ:TMCI) is definitely a stock worth checking out, seeing as almost half of all the Medical Equipment companies in the United States have P/S ratios greater than 3.1x and even P/S above 9x 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 so limited.

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Check out our latest analysis for Treace Medical Concepts

ps-multiple-vs-industry
NasdaqGS:TMCI Price to Sales Ratio vs Industry January 7th 2026

How Has Treace Medical Concepts Performed Recently?

With revenue growth that's inferior to most other companies of late, Treace Medical Concepts has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Treace Medical Concepts' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

Treace Medical Concepts' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.9% last year. This was backed up an excellent period prior to see revenue up by 74% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue growth is heading into negative territory, declining 2.5% over the next year. Meanwhile, the broader industry is forecast to expand by 48%, which paints a poor picture.

With this information, we are not surprised that Treace Medical Concepts is trading at a P/S lower than the industry. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Treace Medical Concepts' P/S is on the lower end of the spectrum. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

You always need to take note of risks, for example - Treace Medical Concepts has 2 warning signs we think you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).