Revenues Tell The Story For MicroPort CardioFlow Medtech Corporation (HKG:2160) As Its Stock Soars 29%

MicroPort CardioFlow Medtech Corporation (HKG:2160) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 30% over that time.

After such a large jump in price, when almost half of the companies in Hong Kong's Medical Equipment industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider MicroPort CardioFlow Medtech as a stock probably not worth researching with its 5.2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for MicroPort CardioFlow Medtech

What Does MicroPort CardioFlow Medtech's Recent Performance Look Like?

Recent revenue growth for MicroPort CardioFlow Medtech has been in line with the industry. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is MicroPort CardioFlow Medtech's Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like MicroPort CardioFlow Medtech's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. The latest three year period has also seen an excellent 153% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 31% per annum as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 22% each year, which is noticeably less attractive.

In light of this, it's understandable that MicroPort CardioFlow Medtech's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

MicroPort CardioFlow Medtech's P/S is on the rise since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of MicroPort CardioFlow Medtech's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for MicroPort CardioFlow Medtech with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on MicroPort CardioFlow Medtech, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.