Despite an already strong run, Rapid Micro Biosystems, Inc. (NASDAQ:RPID) shares have been powering on, with a gain of 37% in the last thirty days. This latest share price bounce rounds out a remarkable 313% gain over the last twelve months.

After such a large jump in price, when almost half of the companies in the United States' Life Sciences industry have price-to-sales ratios (or "P/S") below 3.5x, you may consider Rapid Micro Biosystems as a stock not worth researching with its 6.5x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How Rapid Micro Biosystems Has Been Performing

With revenue growth that's superior to most other companies of late, Rapid Micro Biosystems has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Rapid Micro Biosystems.

What Are Revenue Growth Metrics Telling Us About The High P/S?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Rapid Micro Biosystems' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 17%. Pleasingly, revenue has also lifted 70% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 25% each year over the next three years. That's shaping up to be materially higher than the 6.8% each year growth forecast for the broader industry.

With this in mind, it's not hard to understand why Rapid Micro Biosystems' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Rapid Micro Biosystems' P/S?

Rapid Micro Biosystems' P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Rapid Micro Biosystems' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

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.