Investors Still Aren't Entirely Convinced By Rapid Micro Biosystems, Inc.'s (NASDAQ:RPID) Revenues Despite 27% Price Jump

Despite an already strong run, Rapid Micro Biosystems, Inc. (NASDAQ:RPID) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 28%.

Although its price has surged higher, Rapid Micro Biosystems may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.1x, since almost half of all companies in the Life Sciences industry in the United States have P/S ratios greater than 3.4x and even P/S higher than 7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Rapid Micro Biosystems

How Has Rapid Micro Biosystems Performed Recently?

Recent times have been advantageous for Rapid Micro Biosystems as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Rapid Micro Biosystems' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Rapid Micro Biosystems' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. As a result, it also grew revenue by 13% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 20% over the next year. With the industry only predicted to deliver 4.6%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Rapid Micro Biosystems is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Rapid Micro Biosystems' P/S?

Rapid Micro Biosystems' stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Rapid Micro Biosystems' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Rapid Micro Biosystems that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.