The Winner Medical Co., Ltd. (SZSE:300888) share price has done very well over the last month, posting an excellent gain of 47%. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.7% in the last twelve months.

In spite of the firm bounce in price, Winner Medical's price-to-sales (or "P/S") ratio of 2.7x might still make it look like a strong buy right now compared to the wider Medical Equipment industry in China, where around half of the companies have P/S ratios above 6.2x and even P/S above 10x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

How Winner Medical Has Been Performing

While the industry has experienced revenue growth lately, Winner Medical's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 24%. As a result, revenue from three years ago have also fallen 36% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 25% over the next year. With the industry predicted to deliver 27% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Winner Medical is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Winner Medical's P/S

Even after such a strong price move, Winner Medical's P/S still trails the rest of the industry. 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 seen that Winner Medical currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Before you take the next step, you should know about the 3 warning signs for Winner Medical (1 is significant!) 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.