Benign Growth For MedAdvisor Limited (ASX:MDR) Underpins Stock's 35% Plummet

Unfortunately for some shareholders, the MedAdvisor Limited (ASX:MDR) share price has dived 35% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 57% loss during that time.

After such a large drop in price, MedAdvisor's price-to-sales (or "P/S") ratio of 0.6x might make it look like a strong buy right now compared to the wider Healthcare Services industry in Australia, where around half of the companies have P/S ratios above 8.7x and even P/S above 49x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for MedAdvisor

How Has MedAdvisor Performed Recently?

MedAdvisor hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on MedAdvisor will help you uncover what's on the horizon.

How Is MedAdvisor's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 5.3%. Still, the latest three year period has seen an excellent 61% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next year should generate growth of 6.5% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 240%, which is noticeably more attractive.

With this in consideration, its clear as to why MedAdvisor's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From MedAdvisor's P/S?

MedAdvisor's P/S looks about as weak as its stock price lately. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that MedAdvisor maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for MedAdvisor (1 is potentially serious) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.