Market Participants Recognise Insulet Corporation's (NASDAQ:PODD) Revenues

When close to half the companies in the Medical Equipment industry in the United States have price-to-sales ratios (or "P/S") below 3.1x, you may consider Insulet Corporation (NASDAQ:PODD) as a stock to avoid entirely with its 8.7x P/S ratio. 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

How Insulet Has Been Performing

Recent times have been advantageous for Insulet as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as Insulet's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 28% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 88% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 17% per annum during the coming three years according to the analysts following the company. With the industry only predicted to deliver 9.1% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Insulet's 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.

The Bottom Line On Insulet's P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Insulet shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Insulet you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.