Insufficient Growth At Diagnósticos da América S.A. (BVMF:DASA3) Hampers Share Price

Diagnósticos da América S.A.'s (BVMF:DASA3) price-to-sales (or "P/S") ratio of 0.5x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Healthcare industry in Brazil have P/S ratios greater than 1.1x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Diagnósticos da América

What Does Diagnósticos da América's Recent Performance Look Like?

Recent times haven't been great for Diagnósticos da América as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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 Diagnósticos da América will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Diagnósticos da América?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Diagnósticos da América's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. The latest three year period has also seen an excellent 141% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 9.3% per year as estimated by the nine analysts watching the company. That's shaping up to be materially lower than the 13% per annum growth forecast for the broader industry.

With this in consideration, its clear as to why Diagnósticos da América'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.

The Bottom Line On Diagnósticos da América'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.

We've established that Diagnósticos da América 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 2 warning signs for Diagnósticos da América that you should be aware of.

If these risks are making you reconsider your opinion on Diagnósticos da América, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.