The Price Is Right For Oneview Healthcare PLC (ASX:ONE) Even After Diving 26%

Oneview Healthcare PLC (ASX:ONE) shares have had a horrible month, losing 26% after a relatively good period beforehand. The good news is that in the last year, the stock has shone bright like a diamond, gaining 108%.

Even after such a large drop in price, Oneview Healthcare may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 11.4x, since almost half of all companies in the Healthcare Services industry in Australia have P/S ratios under 6.3x and even P/S lower than 1.9x 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.

Check out our latest analysis for Oneview Healthcare

How Has Oneview Healthcare Performed Recently?

Recent times haven't been great for Oneview Healthcare as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Oneview Healthcare?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Oneview Healthcare's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.3% last year. The latest three year period has also seen an excellent 32% overall rise in revenue, aided somewhat 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 52% per annum during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 23% per year, which is noticeably less attractive.

With this information, we can see why Oneview Healthcare is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Even after such a strong price drop, Oneview Healthcare's P/S still exceeds the industry median significantly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Oneview Healthcare maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Healthcare Services industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Oneview Healthcare that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.