Despite an already strong run, BIMI Holdings Inc. (NASDAQ:BIMI) shares have been powering on, with a gain of 39% in the last thirty days. The annual gain comes to 109% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, you could be forgiven for thinking BIMI Holdings is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.2x, considering almost half the companies in the United States' Healthcare industry have P/S ratios below 0.9x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

How BIMI Holdings Has Been Performing

BIMI Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For BIMI Holdings?

BIMI Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 92% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 104% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 7.2% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that BIMI Holdings' P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From BIMI Holdings' P/S?

BIMI Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of BIMI Holdings revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 4 warning signs for BIMI Holdings (3 are potentially serious!) that we have uncovered.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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