Stock Analysis

Beamtree Holdings Limited (ASX:BMT) Might Not Be As Mispriced As It Looks

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You may think that with a price-to-sales (or "P/S") ratio of 3x Beamtree Holdings Limited (ASX:BMT) is definitely a stock worth checking out, seeing as almost half of all the Healthcare Services companies in Australia have P/S ratios greater than 6.4x and even P/S above 12x 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 highly reduced P/S.

Check out our latest analysis for Beamtree Holdings

ASX:BMT Price to Sales Ratio vs Industry July 27th 2023

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

With revenue growth that's superior to most other companies of late, Beamtree Holdings has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic 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.

Is There Any Revenue Growth Forecasted For Beamtree Holdings?

The only time you'd be truly comfortable seeing a P/S as depressed as Beamtree Holdings' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an exceptional 69% gain to the company's top line. 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 30% each year during the coming three years according to the sole analyst following the company. That's shaping up to be materially higher than the 22% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Beamtree Holdings' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

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. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Beamtree Holdings is showing 3 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Beamtree Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.

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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.