Despite an already strong run, Ocular Therapeutix, Inc. (NASDAQ:OCUL) shares have been powering on, with a gain of 111% in the last thirty days.    The last 30 days bring the annual gain to a very sharp 86%.  

Following the firm bounce in price, Ocular Therapeutix's price-to-sales (or "P/S") ratio of 20.9x might make it look like a strong sell right now compared to other companies in the Pharmaceuticals industry in the United States, where around half of the companies have P/S ratios below 3x and even P/S below 0.6x are quite common.   However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.  

NasdaqGM:OCUL Price to Sales Ratio vs Industry March 6th 2024

What Does Ocular Therapeutix's Recent Performance Look Like?

Ocular Therapeutix certainly has been doing a good job lately as it's been growing revenue more than most other companies.   It seems that many are expecting the strong revenue performance to persist, which has raised the P/S.  However, if this isn't the case, investors might get caught out paying too much for the stock.    

Keen to find out how analysts think Ocular Therapeutix's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Ocular Therapeutix?  

The only time you'd be truly comfortable seeing a P/S as steep as Ocular Therapeutix's is when the company's growth is on track to outshine the industry decidedly.  

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line.   This great performance means it was also able to deliver immense revenue growth over the last three years.  So we can start by confirming that the company has done a tremendous job of growing revenue over that time.  

Looking ahead now, revenue is anticipated to climb by 31% per annum during the coming three years according to the eight analysts following the company.  That's shaping up to be materially lower than the 46% per annum growth forecast for the broader industry.

With this information, we find it concerning that Ocular Therapeutix is trading at a P/S higher than the industry.  Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price.  There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.  

The Key Takeaway

The strong share price surge has lead to Ocular Therapeutix's P/S soaring as well.      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.

It comes as a surprise to see Ocular Therapeutix trade at such a high P/S given the revenue forecasts look less than stellar.  When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures.  At these price levels, investors should remain cautious, particularly if things don't improve.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for Ocular Therapeutix that you need to be mindful of.  

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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