Yahoo Finance Market Participants Recognise Insulet Corporation's (NASDAQ:PODD) Revenues
Insulet Corporation's (NASDAQ:PODD) price-to-sales (or "P/S") ratio of 17.2x might make it look like a strong sell right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios below 3.7x and even P/S below 1.5x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
See our latest analysis for Insulet
What Does Insulet's P/S Mean For Shareholders?
Recent times have been advantageous for Insulet as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.
Keen to find out how analysts think Insulet's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The High P/S?
In order to justify its P/S ratio, Insulet would need to produce outstanding growth that's well in excess of the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 19%. The latest three year period has also seen an excellent 77% 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.
Looking ahead now, revenue is anticipated to climb by 18% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 8.9% per year, which is noticeably less attractive.
In light of this, it's understandable that Insulet's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Key Takeaway
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
Our look into Insulet shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.
There are also other vital risk factors to consider and we've discovered 4 warning signs for Insulet (1 is concerning!) that you should be aware of before investing here.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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