Evolus, Inc. (NASDAQ:EOLS) shareholders won't be pleased to see that the share price has had a very rough month, dropping 31% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 30% in that time.

Since its price has dipped substantially, Evolus may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.2x, considering almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios greater than 3.1x and even P/S higher than 12x 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.

How Evolus Has Been Performing

Recent times have been advantageous for Evolus as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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.

Keen to find out how analysts think Evolus' 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?

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

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. Pleasingly, revenue has also lifted 167% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 30% per annum during the coming three years according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 19% each year, which is noticeably less attractive.

With this information, we find it odd that Evolus 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.

The Bottom Line On Evolus' P/S

The southerly movements of Evolus' shares means its P/S is now sitting at a pretty low level. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Evolus' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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).

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.