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    TransMedics Group, Inc.'s (NASDAQ:TMDX) P/S Is Still On The Mark Following 38% Share Price Bounce

    Simply Wall St·05/30/2025 10:39:12
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    TransMedics Group, Inc. (NASDAQ:TMDX) shares have continued their recent momentum with a 38% gain in the last month alone. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.4% over the last year.

    After such a large jump in price, you could be forgiven for thinking TransMedics Group is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 8.8x, considering almost half the companies in the United States' Medical Equipment industry have P/S ratios below 2.8x. 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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    Check out our latest analysis for TransMedics Group

    ps-multiple-vs-industry
    NasdaqGM:TMDX Price to Sales Ratio vs Industry May 30th 2025

    How TransMedics Group Has Been Performing

    With revenue growth that's superior to most other companies of late, TransMedics Group has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

    Keen to find out how analysts think TransMedics Group'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, TransMedics Group 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 64%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

    Turning to the outlook, the next three years should generate growth of 20% each year as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 10% each year, which is noticeably less attractive.

    With this information, we can see why TransMedics Group is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

    Portfolio Valuation calculation on simply wall st

    The Key Takeaway

    Shares in TransMedics Group have seen a strong upwards swing lately, which has really helped boost its P/S figure. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

    Our look into TransMedics Group 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. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

    It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with TransMedics Group (at least 2 which are a bit concerning), and understanding them should be part of your investment process.

    It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).