Guangzhou Kingmed Diagnostics Group Co., Ltd.'s (SHSE:603882) Business Is Yet to Catch Up With Its Share Price

It's not a stretch to say that Guangzhou Kingmed Diagnostics Group Co., Ltd.'s (SHSE:603882) price-to-sales (or "P/S") ratio of 1.8x right now seems quite "middle-of-the-road" for companies in the Healthcare industry in China, where the median P/S ratio is around 1.7x. 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.

Check out our latest analysis for Guangzhou Kingmed Diagnostics Group

What Does Guangzhou Kingmed Diagnostics Group's Recent Performance Look Like?

Guangzhou Kingmed Diagnostics Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Guangzhou Kingmed Diagnostics Group will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Guangzhou Kingmed Diagnostics Group?

The only time you'd be comfortable seeing a P/S like Guangzhou Kingmed Diagnostics Group's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 29% in total over the last three years. 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 climb by 9.6% per annum during the coming three years according to the twelve analysts following the company. With the industry predicted to deliver 12% growth per annum, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Guangzhou Kingmed Diagnostics Group 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.

The Final Word

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 look at the analysts forecasts of Guangzhou Kingmed Diagnostics Group's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. 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. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Guangzhou Kingmed Diagnostics Group you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.