Shanghai MicroPort EP MedTech Co., Ltd.'s (SHSE:688351) Share Price Is Still Matching Investor Opinion Despite 26% Slump

Shanghai MicroPort EP MedTech Co., Ltd. (SHSE:688351) shares have had a horrible month, losing 26% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 24% in that time.

Even after such a large drop in price, when almost half of the companies in China's Medical Equipment industry have price-to-sales ratios (or "P/S") below 5.7x, you may still consider Shanghai MicroPort EP MedTech as a stock not worth researching with its 21x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Shanghai MicroPort EP MedTech

What Does Shanghai MicroPort EP MedTech's Recent Performance Look Like?

Shanghai MicroPort EP MedTech certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Shanghai MicroPort EP MedTech?

Shanghai MicroPort EP MedTech's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The strong recent performance means it was also able to grow revenue by 102% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 40% per year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 11% per year, which is noticeably less attractive.

With this information, we can see why Shanghai MicroPort EP MedTech is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Shanghai MicroPort EP MedTech's P/S Mean For Investors?

A significant share price dive has done very little to deflate Shanghai MicroPort EP MedTech's very lofty P/S. 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.

Our look into Shanghai MicroPort EP MedTech shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

It is also worth noting that we have found 1 warning sign for Shanghai MicroPort EP MedTech that you need to take into consideration.

If you're unsure about the strength of Shanghai MicroPort EP MedTech's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.