Hapvida Participações e Investimentos S.A. (BVMF:HAPV3) Stocks Pounded By 28% But Not Lagging Industry On Growth Or Pricing

To the annoyance of some shareholders, Hapvida Participações e Investimentos S.A. (BVMF:HAPV3) shares are down a considerable 28% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 49% share price drop.

Although its price has dipped substantially, there still wouldn't be many who think Hapvida Participações e Investimentos' price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in Brazil's Healthcare industry is similar at about 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Hapvida Participações e Investimentos

How Has Hapvida Participações e Investimentos Performed Recently?

Hapvida Participações e Investimentos certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Hapvida Participações e Investimentos.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Hapvida Participações e Investimentos' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 174%. The strong recent performance means it was also able to grow revenue by 186% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the eleven analysts watching the company. With the industry predicted to deliver 11% growth per year, the company is positioned for a comparable revenue result.

With this information, we can see why Hapvida Participações e Investimentos is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Hapvida Participações e Investimentos' P/S?

Following Hapvida Participações e Investimentos' share price tumble, its P/S is just clinging on to the industry median 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 seen that Hapvida Participações e Investimentos maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 1 warning sign for Hapvida Participações e Investimentos 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.