Some MicroPort CardioFlow Medtech Corporation (HKG:2160) Shareholders Look For Exit As Shares Take 26% Pounding

MicroPort CardioFlow Medtech Corporation (HKG:2160) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 49% share price drop.

In spite of the heavy fall in price, you could still be forgiven for thinking MicroPort CardioFlow Medtech is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6x, considering almost half the companies in Hong Kong's Medical Equipment industry have P/S ratios below 2.8x. 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.

See our latest analysis for MicroPort CardioFlow Medtech

How Has MicroPort CardioFlow Medtech Performed Recently?

With revenue growth that's inferior to most other companies of late, MicroPort CardioFlow Medtech has been relatively sluggish. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MicroPort CardioFlow Medtech.

Is There Enough Revenue Growth Forecasted For MicroPort CardioFlow Medtech?

MicroPort CardioFlow Medtech's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The latest three year period has also seen an excellent 223% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 32% per annum over the next three years. That's shaping up to be materially lower than the 48% per annum growth forecast for the broader industry.

In light of this, it's alarming that MicroPort CardioFlow Medtech's P/S sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Final Word

Even after such a strong price drop, MicroPort CardioFlow Medtech's P/S still exceeds the industry median significantly. 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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for MicroPort CardioFlow Medtech, this doesn't appear to be impacting the P/S in the slightest. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. At these price levels, investors should remain cautious, particularly if things don't improve.

A lot of potential risks can sit within a 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com