MicroPort Scientific Corporation (HKG:853) shareholders that were waiting for something to happen have been dealt a blow with a 38% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 58% loss during that time.

Following the heavy fall in price, MicroPort Scientific may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2.1x, considering almost half of all companies in the Medical Equipment industry in Hong Kong have P/S ratios greater than 4.3x and even P/S higher than 10x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for MicroPort Scientific

What Does MicroPort Scientific's Recent Performance Look Like?

Recent times haven't been great for MicroPort Scientific as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is MicroPort Scientific's Revenue Growth Trending?

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

Retrospectively, the last year delivered a decent 15% gain to the company's revenues. The latest three year period has also seen a 30% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 27% per year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 94% each year, which is noticeably more attractive.

With this information, we can see why MicroPort Scientific is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From MicroPort Scientific's P/S?

MicroPort Scientific's P/S looks about as weak as its stock price lately. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that MicroPort Scientific maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for MicroPort Scientific that we have uncovered.

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).

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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.