Those holding 908 Devices Inc. (NASDAQ:MASS) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The annual gain comes to 152% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, given close to half the companies operating in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2.8x, you may consider 908 Devices as a stock to potentially avoid with its 3.9x P/S ratio. 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 908 Devices Performed Recently?

Recent times have been advantageous for 908 Devices as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on 908 Devices will help you uncover what's on the horizon.

How Is 908 Devices' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 36% last year. The latest three year period has also seen a 27% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 3.5% as estimated by the four analysts watching the company. Meanwhile, the broader industry is forecast to expand by 20%, which paints a poor picture.

With this information, we find it concerning that 908 Devices is trading at a P/S higher than the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh heavily on the share price eventually.

What We Can Learn From 908 Devices' P/S?

908 Devices shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

For a company with revenues that are set to decline in the context of a growing industry, 908 Devices' P/S is much higher than we would've anticipated. Right now we aren't comfortable with the high P/S as the predicted future revenue decline likely to impact the positive sentiment that's propping up the P/S. At these price levels, investors should remain cautious, particularly if things don't improve.

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.

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.