Suzhou Basecare Medical Corporation Limited (HKG:2170) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 48% over that time.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Suzhou Basecare Medical's P/S ratio of 3x, since the median price-to-sales (or "P/S") ratio for the Medical Equipment industry in Hong Kong is also close to 2.9x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does Suzhou Basecare Medical's Recent Performance Look Like?

Recent revenue growth for Suzhou Basecare Medical has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

Is There Some Revenue Growth Forecasted For Suzhou Basecare Medical?

The only time you'd be comfortable seeing a P/S like Suzhou Basecare Medical's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 48%. The latest three year period has also seen an excellent 156% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 120% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 35%, the company is positioned for a stronger revenue result.

In light of this, it's curious that Suzhou Basecare Medical's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Its shares have lifted substantially and now Suzhou Basecare Medical's P/S is back within range of the industry median. 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.

Despite enticing revenue growth figures that outpace the industry, Suzhou Basecare Medical's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Suzhou Basecare Medical that you should be aware of.

If these risks are making you reconsider your opinion on Suzhou Basecare Medical, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.