There's No Escaping Alcidion Group Limited's (ASX:ALC) Muted Revenues Despite A 30% Share Price Rise

The Alcidion Group Limited (ASX:ALC) share price has done very well over the last month, posting an excellent gain of 30%. The last month tops off a massive increase of 128% in the last year.

In spite of the firm bounce in price, Alcidion Group may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4x, considering almost half of all companies in the Healthcare Services industry in Australia have P/S ratios greater than 5.5x and even P/S higher than 69x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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View our latest analysis for Alcidion Group

How Alcidion Group Has Been Performing

Alcidion Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Alcidion Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Alcidion Group?

In order to justify its P/S ratio, Alcidion Group would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 12% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 29% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 18% over the next year. Meanwhile, the rest of the industry is forecast to expand by 208%, which is noticeably more attractive.

In light of this, it's understandable that Alcidion Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Alcidion Group's P/S?

The latest share price surge wasn't enough to lift Alcidion Group's P/S close to the industry median. 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.

As we suspected, our examination of Alcidion Group's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Alcidion Group that you should be aware of.

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.