Xi'an International Medical Investment Company Limited (SZSE:000516) Not Lagging Industry On Growth Or Pricing

When you see that almost half of the companies in the Healthcare industry in China have price-to-sales ratios (or "P/S") below 1.9x, Xi'an International Medical Investment Company Limited (SZSE:000516) looks to be giving off some sell signals with its 3.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Xi'an International Medical Investment

What Does Xi'an International Medical Investment's P/S Mean For Shareholders?

Xi'an International Medical Investment certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Xi'an International Medical Investment's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 49% gain to the company's top line. Pleasingly, revenue has also lifted 198% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 36% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 19%, which is noticeably less attractive.

In light of this, it's understandable that Xi'an International Medical Investment's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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.

As we suspected, our examination of Xi'an International Medical Investment's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 1 warning sign for Xi'an International Medical Investment that you should be aware of.

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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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.