There's No Escaping MicroPort Scientific Corporation's (HKG:853) Muted Revenues Despite A 58% Share Price Rise

Despite an already strong run, MicroPort Scientific Corporation (HKG:853) shares have been powering on, with a gain of 58% in the last thirty days. The last month tops off a massive increase of 183% in the last year.

Although its price has surged higher, given about half the companies operating in Hong Kong's Medical Equipment industry have price-to-sales ratios (or "P/S") above 6.3x, you may still consider MicroPort Scientific as an attractive investment with its 3.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for MicroPort Scientific

What Does MicroPort Scientific's P/S Mean For Shareholders?

MicroPort Scientific could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For MicroPort Scientific?

In order to justify its P/S ratio, MicroPort Scientific would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 8.5% gain to the company's revenues. Pleasingly, revenue has also lifted 32% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 14% each year during the coming three years according to the six analysts following the company. That's shaping up to be materially lower than the 27% each year growth forecast for the broader industry.

In light of this, it's understandable that MicroPort Scientific's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

The latest share price surge wasn't enough to lift MicroPort Scientific's P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of MicroPort Scientific's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for MicroPort Scientific you should be aware of.

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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.