Market Might Still Lack Some Conviction On Optomed Oyj (HEL:OPTOMED) Even After 25% Share Price Boost

The Optomed Oyj (HEL:OPTOMED) share price has done very well over the last month, posting an excellent gain of 25%. Unfortunately, despite the strong performance over the last month, the full year gain of 4.7% isn't as attractive.

Although its price has surged higher, it's still not a stretch to say that Optomed Oyj's price-to-sales (or "P/S") ratio of 5x right now seems quite "middle-of-the-road" compared to the Medical Equipment industry in Finland, where the median P/S ratio is around 4.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Optomed Oyj

What Does Optomed Oyj's Recent Performance Look Like?

Recent times have been advantageous for Optomed Oyj as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.

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

Is There Some Revenue Growth Forecasted For Optomed Oyj?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Optomed Oyj's to be considered reasonable.

Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. Revenue has also lifted 15% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 25% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 14% each year, which is noticeably less attractive.

With this in consideration, we find it intriguing that Optomed Oyj's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Optomed Oyj's P/S Mean For Investors?

Optomed Oyj's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that Optomed Oyj currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 3 warning signs for Optomed Oyj that you need to take into consideration.

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.