To the annoyance of some shareholders, Suzhou MedicalSystem Technology Co., Ltd. (SHSE:603990) shares are down a considerable 28% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 48% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Suzhou MedicalSystem Technology's P/S ratio of 5.7x, since the median price-to-sales (or "P/S") ratio for the Healthcare Services industry in China is also close to 6.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does Suzhou MedicalSystem Technology's Recent Performance Look Like?

Suzhou MedicalSystem Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

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

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. The latest three year period has also seen an excellent 39% 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 603% as estimated by the lone analyst watching the company. That's shaping up to be materially higher than the 37% growth forecast for the broader industry.

In light of this, it's curious that Suzhou MedicalSystem Technology's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Suzhou MedicalSystem Technology's P/S

With its share price dropping off a cliff, the P/S for Suzhou MedicalSystem Technology looks to be in line with the rest of the Healthcare Services industry. 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.

Looking at Suzhou MedicalSystem Technology's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. 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.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Suzhou MedicalSystem Technology with six simple checks will allow you to discover any risks that could be an issue.

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).

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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.