Subdued Growth No Barrier To Oneview Healthcare PLC (ASX:ONE) With Shares Advancing 27%

Oneview Healthcare PLC (ASX:ONE) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 2.9% isn't as attractive.

Since its price has surged higher, Oneview Healthcare may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 16.2x, since almost half of all companies in the Healthcare Services industry in Australia have P/S ratios under 8.9x and even P/S lower than 3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Oneview Healthcare

How Has Oneview Healthcare Performed Recently?

With revenue growth that's inferior to most other companies of late, Oneview Healthcare has been relatively sluggish. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Oneview Healthcare's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Oneview Healthcare's Revenue Growth Trending?

Oneview Healthcare's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a decent 5.3% gain to the company's revenues. However, due to its less than impressive performance prior to this period, revenue growth is practically non-existent over the last three years overall. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 41% per year during the coming three years according to the three analysts following the company. That's shaping up to be materially lower than the 158% per annum growth forecast for the broader industry.

In light of this, it's alarming that Oneview Healthcare's P/S sits above the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Key Takeaway

Shares in Oneview Healthcare have seen a strong upwards swing lately, which has really helped boost its P/S figure. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It comes as a surprise to see Oneview Healthcare trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Oneview Healthcare with six simple checks.

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.