The Whole Shine Medical Technology Co., Ltd. (SZSE:002622) share price has softened a substantial 29% over the previous 30 days, handing back much of the gains the stock has made lately. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 19% share price drop.

In spite of the heavy fall in price, you could still be forgiven for thinking Whole Shine Medical Technology is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.6x, considering almost half the companies in China's Healthcare industry have P/S ratios below 1.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

How Has Whole Shine Medical Technology Performed Recently?

With revenue growth that's exceedingly strong of late, Whole Shine Medical Technology has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

How Is Whole Shine Medical Technology's Revenue Growth Trending?

Whole Shine Medical Technology's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 42%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 13% shows it's noticeably more attractive.

With this information, we can see why Whole Shine Medical Technology is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

There's still some elevation in Whole Shine Medical Technology's P/S, even if the same can't be said for its share price recently. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Whole Shine Medical Technology revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Whole Shine Medical Technology you should be aware of, and 1 of them is a bit concerning.

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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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.