Lacklustre Performance Is Driving MedAdvisor Limited's (ASX:MDR) Low P/S

You may think that with a price-to-sales (or "P/S") ratio of 1.6x MedAdvisor Limited (ASX:MDR) 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 9.5x and even P/S above 20x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for MedAdvisor

What Does MedAdvisor's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, MedAdvisor 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 MedAdvisor.

Is There Any Revenue Growth Forecasted For MedAdvisor?

In order to justify its P/S ratio, MedAdvisor would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. The latest three year period has also seen an excellent 215% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 15% per year during the coming three years according to the three analysts following the company. With the industry predicted to deliver 33% growth per year, the company is positioned for a weaker revenue result.

With this information, we can see why MedAdvisor is trading at a P/S lower than the industry. 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?

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 expected, our analysis of MedAdvisor's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for MedAdvisor with six simple checks will allow you to discover any risks that could be an issue.

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.