Some Confidence Is Lacking In Oncoclínicas do Brasil Serviços Médicos S.A. (BVMF:ONCO3) As Shares Slide 33%

Oncoclínicas do Brasil Serviços Médicos S.A. (BVMF:ONCO3) shareholders that were waiting for something to happen have been dealt a blow with a 33% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 40% share price drop.

Even after such a large drop in price, there still wouldn't be many who think Oncoclínicas do Brasil Serviços Médicos' price-to-sales (or "P/S") ratio of 0.4x is worth a mention when the median P/S in Brazil's Healthcare industry is similar at about 0.6x. 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.

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Check out our latest analysis for Oncoclínicas do Brasil Serviços Médicos

What Does Oncoclínicas do Brasil Serviços Médicos' P/S Mean For Shareholders?

Recent times have been advantageous for Oncoclínicas do Brasil Serviços Médicos as its revenues have been rising faster 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 the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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Is There Some Revenue Growth Forecasted For Oncoclínicas do Brasil Serviços Médicos?

Oncoclínicas do Brasil Serviços Médicos' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.1%. This was backed up an excellent period prior to see revenue up by 95% 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 6.2% per annum as estimated by the eight analysts watching the company. With the industry predicted to deliver 12% growth each year, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Oncoclínicas do Brasil Serviços Médicos is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Oncoclínicas do Brasil Serviços Médicos' P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Oncoclínicas do Brasil Serviços Médicos looks to be in line with the rest of the Healthcare industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

When you consider that Oncoclínicas do Brasil Serviços Médicos' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

It is also worth noting that we have found 1 warning sign for Oncoclínicas do Brasil Serviços Médicos that you need to take into consideration.

If you're unsure about the strength of Oncoclínicas do Brasil Serviços Médicos' 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.