Investors Continue Waiting On Sidelines For dentalcorp Holdings Ltd. (TSE:DNTL)

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Healthcare industry in Canada, you could be forgiven for feeling indifferent about dentalcorp Holdings Ltd.'s (TSE:DNTL) P/S ratio of 1x. 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 dentalcorp Holdings

How Has dentalcorp Holdings Performed Recently?

With revenue growth that's inferior to most other companies of late, dentalcorp Holdings has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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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 dentalcorp Holdings' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.9% last year. This was backed up an excellent period prior to see revenue up by 43% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 8.6% per annum during the coming three years according to the eleven analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.4% per annum, which is noticeably less attractive.

With this information, we find it interesting that dentalcorp Holdings is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On dentalcorp Holdings' 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.

Despite enticing revenue growth figures that outpace the industry, dentalcorp Holdings' P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You should always think about risks. Case in point, we've spotted 1 warning sign for dentalcorp Holdings you should be aware of.

If these risks are making you reconsider your opinion on dentalcorp Holdings, 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.