Investors Appear Satisfied With KORU Medical Systems, Inc.'s (NASDAQ:KRMD) Prospects As Shares Rocket 34%

Despite an already strong run, KORU Medical Systems, Inc. (NASDAQ:KRMD) shares have been powering on, with a gain of 34% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 86% in the last year.

After such a large jump in price, you could be forgiven for thinking KORU Medical Systems is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.4x, considering almost half the companies in the United States' 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.

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See our latest analysis for KORU Medical Systems

What Does KORU Medical Systems' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, KORU Medical Systems has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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How Is KORU Medical Systems' Revenue Growth Trending?

In order to justify its P/S ratio, KORU Medical Systems would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. The strong recent performance means it was also able to grow revenue by 46% in total over the last three years. 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 year should generate growth of 17% as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 9.6% growth forecast for the broader industry.

With this in mind, it's not hard to understand why KORU Medical Systems' 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.

What We Can Learn From KORU Medical Systems' P/S?

Shares in KORU Medical Systems have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Our look into KORU Medical Systems shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with KORU Medical Systems, and understanding should be part of your investment process.

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.