The MicroPort CardioFlow Medtech Corporation (HKG:2160) share price has done very well over the last month, posting an excellent gain of 50%. The last 30 days bring the annual gain to a very sharp 74%.

After such a large jump in price, MicroPort CardioFlow Medtech's price-to-sales (or "P/S") ratio of 8x might make it look like a strong sell right now compared to other companies in the Medical Equipment industry in Hong Kong, where around half of the companies have P/S ratios below 5.1x and even P/S below 1.6x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for MicroPort CardioFlow Medtech

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

With revenue growth that's inferior to most other companies of late, MicroPort CardioFlow Medtech has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

The only time you'd be truly comfortable seeing a P/S as steep as MicroPort CardioFlow Medtech's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a decent 7.5% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 80% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 34% per annum over the next three years. That's shaping up to be materially higher than the 24% per year growth forecast for the broader industry.

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

The Bottom Line On MicroPort CardioFlow Medtech's P/S

The strong share price surge has lead to MicroPort CardioFlow Medtech's P/S soaring as well. 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. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

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.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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.