Medicure Inc. (CVE:MPH) Stock Catapults 28% Though Its Price And Business Still Lag The Industry

Medicure Inc. (CVE:MPH) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 21% in the last twelve months.

Even after such a large jump in price, Medicure may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Biotechs industry in Canada have P/S ratios greater than 8.1x and even P/S higher than 48x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Medicure

What Does Medicure's Recent Performance Look Like?

It looks like revenue growth has deserted Medicure recently, which is not something to boast about. Perhaps the market believes the recent lacklustre revenue performance is a sign of future underperformance relative to industry peers, hurting the P/S. Those who are bullish on Medicure will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Medicure will help you shine a light on its historical performance.

How Is Medicure's Revenue Growth Trending?

In order to justify its P/S ratio, Medicure would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. That's essentially a continuation of what we've seen over the last three years, as its revenue growth has been virtually non-existent for that entire period. Therefore, it's fair to say that revenue growth has definitely eluded the company recently.

This is in contrast to the rest of the industry, which is expected to grow by 161% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Medicure's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Medicure's P/S

Even after such a strong price move, Medicure's P/S still trails the rest of the 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.

Our examination of Medicure confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Medicure that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.