Stock Analysis

A Piece Of The Puzzle Missing From Beamtree Holdings Limited's (ASX:BMT) 31% Share Price Climb

Source: Shutterstock

Beamtree Holdings Limited (ASX:BMT) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 23% over that time.

In spite of the firm bounce in price, Beamtree Holdings may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.6x, since almost half of all companies in the Healthcare Services industry in Australia have P/S ratios greater than 6.2x and even P/S higher than 18x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Beamtree Holdings

ASX:BMT Price to Sales Ratio vs Industry May 10th 2024

What Does Beamtree Holdings' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Beamtree Holdings has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Beamtree Holdings' Revenue Growth Trending?

Beamtree Holdings' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 32% per annum during the coming three years according to the sole analyst following the company. With the industry only predicted to deliver 23% per annum, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Beamtree Holdings' P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Beamtree Holdings' P/S?

Beamtree Holdings' recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

To us, it seems Beamtree Holdings currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Beamtree Holdings (1 shouldn't be ignored) you should be aware of.

If you're unsure about the strength of Beamtree Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Valuation is complex, but we're helping make it simple.

Find out whether Beamtree Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at)

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.