Revenues Tell The Story For Median Technologies SA (EPA:ALMDT) As Its Stock Soars 72%

Median Technologies SA (EPA:ALMDT) shares have continued their recent momentum with a 72% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 43%.

Following the firm bounce in price, you could be forgiven for thinking Median Technologies is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.5x, considering almost half the companies in France's Healthcare Services industry have P/S ratios below 2.3x. 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 Median Technologies

How Median Technologies Has Been Performing

Median Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. 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 Median Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Median Technologies' Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 4.9%. Even so, admirably revenue has lifted 68% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 18% per annum over the next three years. With the industry only predicted to deliver 10% each year, the company is positioned for a stronger revenue result.

With this information, we can see why Median Technologies is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Median Technologies' P/S Mean For Investors?

Shares in Median Technologies have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Median Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Healthcare Services 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Median Technologies (at least 3 which are a bit unpleasant), and understanding them should be part of your investment process.

If you're unsure about the strength of Median Technologies' 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.