Ocular Therapeutix, Inc. (NASDAQ:OCUL) shares have continued their recent momentum with a 31% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 48%.

After such a large jump in price, Ocular Therapeutix's price-to-sales (or "P/S") ratio of 32.3x 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 5.3x and even P/S below 1.4x 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.

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See our latest analysis for Ocular Therapeutix

How Has Ocular Therapeutix Performed Recently?

Ocular Therapeutix hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

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

In order to justify its P/S ratio, Ocular Therapeutix would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period was better as it's delivered a decent 21% overall rise in revenue. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 41% each year during the coming three years according to the twelve analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 18% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Ocular Therapeutix's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Ocular Therapeutix's P/S

Ocular Therapeutix's P/S has grown nicely over the last month thanks to a handy boost in the share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Ocular Therapeutix maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Pharmaceuticals industry, as expected. 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.

Before you settle on your opinion, we've discovered 2 warning signs for Ocular Therapeutix that you should be aware 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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