Qualicorp Consultoria e Corretora de Seguros S.A. (BVMF:QUAL3) Stock Rockets 48% As Investors Are Less Pessimistic Than Expected

Qualicorp Consultoria e Corretora de Seguros S.A. (BVMF:QUAL3) shareholders would be excited to see that the share price has had a great month, posting a 48% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Qualicorp Consultoria e Corretora de Seguros' price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Healthcare industry in Brazil, where the median P/S ratio is around 0.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Qualicorp Consultoria e Corretora de Seguros

What Does Qualicorp Consultoria e Corretora de Seguros' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Qualicorp Consultoria e Corretora de Seguros' revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Qualicorp Consultoria e Corretora de Seguros will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, Qualicorp Consultoria e Corretora de Seguros would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. The last three years don't look nice either as the company has shrunk revenue by 20% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 4.1% per year during the coming three years according to the six analysts following the company. Meanwhile, the broader industry is forecast to expand by 11% each year, which paints a poor picture.

In light of this, it's somewhat alarming that Qualicorp Consultoria e Corretora de Seguros' P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What Does Qualicorp Consultoria e Corretora de Seguros' P/S Mean For Investors?

Qualicorp Consultoria e Corretora de Seguros appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

While Qualicorp Consultoria e Corretora de Seguros' P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

You should always think about risks. Case in point, we've spotted 3 warning signs for Qualicorp Consultoria e Corretora de Seguros you should be aware of, and 2 of them are a bit concerning.

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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