Rapid Micro Biosystems, Inc. (NASDAQ:RPID) Stocks Shoot Up 45% But Its P/S Still Looks Reasonable

Rapid Micro Biosystems, Inc. (NASDAQ:RPID) shares have had a really impressive month, gaining 45% after a shaky period beforehand. The last 30 days were the cherry on top of the stock's 308% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, you could be forgiven for thinking Rapid Micro Biosystems is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4.8x, considering almost half the companies in the United States' Life Sciences industry have P/S ratios below 2.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Rapid Micro Biosystems

How Has Rapid Micro Biosystems Performed Recently?

With revenue growth that's superior to most other companies of late, Rapid Micro Biosystems has been doing relatively well. 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.

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

Do Revenue Forecasts Match The High P/S Ratio?

Rapid Micro Biosystems' 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.

If we review the last year of revenue growth, the company posted a terrific increase of 28%. The strong recent performance means it was also able to grow revenue by 32% 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 16% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 5.3%, which is noticeably less attractive.

With this information, we can see why Rapid Micro Biosystems 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

Rapid Micro Biosystems' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of Rapid Micro Biosystems' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Rapid Micro Biosystems you should know about.

If you're unsure about the strength of Rapid Micro Biosystems' 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.