After Leaping 34% MicroPort CardioFlow Medtech Corporation (HKG:2160) Shares Are Not Flying Under The Radar

Simply Wall St · 09/27 23:10

MicroPort CardioFlow Medtech Corporation (HKG:2160) shares have had a really impressive month, gaining 34% after a shaky period beforehand. But the last month did very little to improve the 50% share price decline over the last year.

After such a large jump in price, you could be forgiven for thinking MicroPort CardioFlow Medtech is a stock not worth researching with a price-to-sales ratios (or "P/S") of 4.7x, considering almost half the companies in Hong Kong's Medical Equipment industry have P/S ratios below 3.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for MicroPort CardioFlow Medtech

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SEHK:2160 Price to Sales Ratio vs Industry September 27th 2024

What Does MicroPort CardioFlow Medtech's Recent Performance Look Like?

MicroPort CardioFlow Medtech certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. 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 MicroPort CardioFlow Medtech.

Do Revenue Forecasts Match The High P/S Ratio?

MicroPort CardioFlow Medtech's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 27%. The latest three year period has also seen an excellent 153% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 30% per annum during the coming three years according to the three analysts following the company. With the industry only predicted to deliver 23% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why MicroPort CardioFlow Medtech'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.

What Does MicroPort CardioFlow Medtech's P/S Mean For Investors?

MicroPort CardioFlow Medtech's P/S is on the rise since its shares have risen strongly. 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.

Our look into MicroPort CardioFlow Medtech 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 these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for MicroPort CardioFlow Medtech with six simple checks on some of these key factors.

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).