Investors Still Waiting For A Pull Back In Inner Mongolia Furui Medical Science Co., Ltd. (SZSE:300049)

Inner Mongolia Furui Medical Science Co., Ltd.'s (SZSE:300049) price-to-sales (or "P/S") ratio of 10.5x may look like a poor investment opportunity when you consider close to half the companies in the Pharmaceuticals industry in China have P/S ratios below 3.3x. 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.

Check out our latest analysis for Inner Mongolia Furui Medical Science

What Does Inner Mongolia Furui Medical Science's Recent Performance Look Like?

Inner Mongolia Furui Medical Science could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Inner Mongolia Furui Medical Science?

The only time you'd be truly comfortable seeing a P/S as steep as Inner Mongolia Furui Medical Science's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a decent 7.8% gain to the company's revenues. The latest three year period has also seen an excellent 34% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 36% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 17%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Inner Mongolia Furui Medical Science's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Inner Mongolia Furui Medical Science's 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.

We've established that Inner Mongolia Furui Medical Science maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Pharmaceuticals industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for Inner Mongolia Furui Medical Science you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.