Further Upside For Whole Shine Medical Technology Co., Ltd. (SZSE:002622) Shares Could Introduce Price Risks After 36% Bounce

Whole Shine Medical Technology Co., Ltd. (SZSE:002622) shares have continued their recent momentum with a 36% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 37% over that time.

Even after such a large jump in price, there still wouldn't be many who think Whole Shine Medical Technology's price-to-sales (or "P/S") ratio of 2x is worth a mention when the median P/S in China's Healthcare industry is similar at about 1.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Whole Shine Medical Technology

What Does Whole Shine Medical Technology's Recent Performance Look Like?

Recent times have been quite advantageous for Whole Shine Medical Technology as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Whole Shine Medical Technology's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 37% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 14% shows it's noticeably more attractive.

With this information, we find it interesting that Whole Shine Medical Technology is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Whole Shine Medical Technology's P/S Mean For Investors?

Whole Shine Medical Technology appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 didn't quite envision Whole Shine Medical Technology's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 2 warning signs for Whole Shine Medical Technology that you need to take into consideration.

If you're unsure about the strength of Whole Shine Medical Technology'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.