Median Technologies SA (EPA:ALMDT) Stocks Shoot Up 40% But Its P/S Still Looks Reasonable

Median Technologies SA (EPA:ALMDT) shares have had a really impressive month, gaining 40% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

Since its price has surged higher, when almost half of the companies in France's Healthcare Services industry have price-to-sales ratios (or "P/S") below 2.4x, you may consider Median Technologies as a stock probably not worth researching with its 4.2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Median Technologies

How Has Median Technologies Performed Recently?

Median Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Median Technologies will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The High P/S?

Median Technologies' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 25% in total over the last three years. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 15% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 11% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Median Technologies' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Median Technologies shares have taken a big step in a northerly direction, but its P/S is elevated as a result. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Median Technologies' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

There are also other vital risk factors to consider and we've discovered 5 warning signs for Median Technologies (3 shouldn't be ignored!) that you should be aware of before investing here.

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).

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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.