Even With A 43% Surge, Cautious Investors Are Not Rewarding Doctor Care Anywhere Group PLC's (ASX:DOC) Performance Completely

Doctor Care Anywhere Group PLC (ASX:DOC) shares have had a really impressive month, gaining 43% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 29%.

In spite of the firm bounce in price, Doctor Care Anywhere Group may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Healthcare Services industry in Australia have P/S ratios greater than 7.1x and even P/S higher than 31x 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.

View our latest analysis for Doctor Care Anywhere Group

What Does Doctor Care Anywhere Group's P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Doctor Care Anywhere Group 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 you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Doctor Care Anywhere Group.

Is There Any Revenue Growth Forecasted For Doctor Care Anywhere Group?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Doctor Care Anywhere Group's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. 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 57% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 51%, which is noticeably less attractive.

With this information, we find it odd that Doctor Care Anywhere Group is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Shares in Doctor Care Anywhere Group have risen appreciably however, its P/S is still subdued. 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.

A look at Doctor Care Anywhere Group's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. 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.

Plus, you should also learn about these 2 warning signs we've spotted with Doctor Care Anywhere Group.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.