Silk Road Medical, Inc's (NASDAQ:SILK) Shares Leap 35% Yet They're Still Not Telling The Full Story

Despite an already strong run, Silk Road Medical, Inc (NASDAQ:SILK) shares have been powering on, with a gain of 35% in the last thirty days. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 72% share price drop in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Silk Road Medical's price-to-sales (or "P/S") ratio of 3.5x is worth a mention when the median P/S in the United States' Medical Equipment industry is similar at about 3.3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Silk Road Medical

How Silk Road Medical Has Been Performing

With revenue growth that's superior to most other companies of late, Silk Road Medical has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Is There Some Revenue Growth Forecasted For Silk Road Medical?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Silk Road Medical's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 34% gain to the company's top line. Pleasingly, revenue has also lifted 134% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 12% each year as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 10.0% per annum growth forecast for the broader industry.

With this information, we find it interesting that Silk Road Medical is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Silk Road Medical appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Despite enticing revenue growth figures that outpace the industry, Silk Road Medical's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 2 warning signs for Silk Road Medical that we have uncovered.

If you're unsure about the strength of Silk Road 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.