Investors Interested In Inari Medical, Inc.'s (NASDAQ:NARI) Revenues

With a price-to-sales (or "P/S") ratio of 4.6x Inari Medical, Inc. (NASDAQ:NARI) may be sending bearish signals at the moment, given that almost half of all Medical Equipment companies in the United States have P/S ratios under 3.3x and even P/S lower than 1.2x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Inari Medical

How Has Inari Medical Performed Recently?

With revenue growth that's superior to most other companies of late, Inari Medical 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.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Inari Medical would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. The latest three year period has also seen an excellent 163% 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.

Looking ahead now, revenue is anticipated to climb by 18% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 9.2% per year, which is noticeably less attractive.

With this information, we can see why Inari Medical 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 Inari Medical's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Inari Medical 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.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Inari Medical with six simple checks.

If you're unsure about the strength of Inari Medical's 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.