Market Participants Recognise SHL Telemedicine Ltd.'s (VTX:SHLTN) Revenues Pushing Shares 30% Higher

SHL Telemedicine Ltd. (VTX:SHLTN) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 50% over that time.

After such a large jump in price, you could be forgiven for thinking SHL Telemedicine is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.7x, considering almost half the companies in Switzerland's Healthcare industry have P/S ratios below 0.7x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for SHL Telemedicine

What Does SHL Telemedicine's Recent Performance Look Like?

While the industry has experienced revenue growth lately, SHL Telemedicine's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think SHL Telemedicine's future stacks up against the industry? In that case, our free report is a great place to start.

How Is SHL Telemedicine's Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like SHL Telemedicine's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 3.3%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 42% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 8.6% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 5.3% growth forecast for the broader industry.

With this information, we can see why SHL Telemedicine is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From SHL Telemedicine's P/S?

SHL Telemedicine shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

Our look into SHL Telemedicine shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

We don't want to rain on the parade too much, but we did also find 2 warning signs for SHL Telemedicine (1 can't be ignored!) 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.