Revenues Tell The Story For Glaukos Corporation (NYSE:GKOS)

With a price-to-sales (or "P/S") ratio of 21.3x Glaukos Corporation (NYSE:GKOS) 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 3.4x and even P/S lower than 1.3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Glaukos

What Does Glaukos' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Glaukos has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

Glaukos' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. As a result, it also grew revenue by 23% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 25% per year as estimated by the analysts watching the company. With the industry only predicted to deliver 9.2% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Glaukos' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Glaukos' P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Glaukos 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.

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

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.