The BioLife Solutions, Inc. (NASDAQ:BLFS) share price has done very well over the last month, posting an excellent gain of 31%. The annual gain comes to 108% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, 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 BioLife Solutions as a stock not worth researching with its 8.3x 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 BioLife Solutions Has Been Performing

With revenue that's retreating more than the industry's average of late, BioLife Solutions has been very sluggish. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. However, if this isn't the case, investors might get caught out paying too much for the stock.

Do Revenue Forecasts Match The High P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 14% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 89% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 9.4% per year over the next three years. With the industry only predicted to deliver 7.2% each year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why BioLife Solutions' 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.

What Does BioLife Solutions' P/S Mean For Investors?

Shares in BioLife Solutions have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Our look into BioLife Solutions shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for BioLife Solutions you should know about.

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.

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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.