Kora Saúde Participações S.A.'s (BVMF:KRSA3) Business And Shares Still Trailing The Industry

Kora Saúde Participações S.A.'s (BVMF:KRSA3) price-to-sales (or "P/S") ratio of 0.2x 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 0.7x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Kora Saúde Participações

What Does Kora Saúde Participações' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, Kora Saúde Participações has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Kora Saúde Participações?

In order to justify its P/S ratio, Kora Saúde Participações would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.6% last year. The latest three year period has also seen an excellent 166% 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 6.8% each year as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 11% per annum growth forecast for the broader industry.

In light of this, it's understandable that Kora Saúde Participações' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

As we suspected, our examination of Kora Saúde Participações' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Kora Saúde Participações has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

If these risks are making you reconsider your opinion on Kora Saúde Participações, 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.