Insulet Corporation's (NASDAQ:PODD) Earnings Haven't Escaped The Attention Of Investors

With a price-to-sales (or "P/S") ratio of 7.2x Insulet Corporation (NASDAQ:PODD) may be sending very bearish signals at the moment, given that almost half of all the 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 so lofty.

View our latest analysis for Insulet

What Does Insulet's Recent Performance Look Like?

Recent times have been advantageous for Insulet as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Insulet will help you uncover what's on the horizon.

How Is Insulet's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 30%. The latest three year period has also seen an excellent 88% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 17% per annum as estimated by the analysts watching the company. That's shaping up to be materially higher than the 10% each year growth forecast for the broader industry.

With this information, we can see why Insulet is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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 Insulet shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Insulet that you should be aware of.

If you're unsure about the strength of Insulet'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.