Take Care Before Diving Into The Deep End On Regis Healthcare Limited (ASX:REG)

There wouldn't be many who think Regis Healthcare Limited's (ASX:REG) price-to-sales (or "P/S") ratio of 1.8x is worth a mention when the median P/S for the Healthcare industry in Australia is similar at about 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Regis Healthcare

What Does Regis Healthcare's Recent Performance Look Like?

Regis Healthcare certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Regis Healthcare's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Regis Healthcare's is when the company's growth is tracking the industry closely.

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 54% 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.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 9.5% per year over the next three years. That's shaping up to be materially higher than the 6.6% each year growth forecast for the broader industry.

With this information, we find it interesting that Regis Healthcare is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Regis Healthcare's P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Regis Healthcare currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Regis Healthcare that you should be aware of.

If you're unsure about the strength of Regis Healthcare's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.