Whole Shine Medical Technology Co., Ltd. (SZSE:002622) Stock's 27% Dive Might Signal An Opportunity But It Requires Some Scrutiny

Unfortunately for some shareholders, the Whole Shine Medical Technology Co., Ltd. (SZSE:002622) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 63% loss during that time.

In spite of the heavy fall in price, there still wouldn't be many who think Whole Shine Medical Technology's price-to-sales (or "P/S") ratio of 1.3x is worth a mention when it essentially matches the median P/S in China's Healthcare industry. 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.

Check out our latest analysis for Whole Shine Medical Technology

What Does Whole Shine Medical Technology's P/S Mean For Shareholders?

Whole Shine Medical Technology certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Whole Shine Medical Technology will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Whole Shine Medical Technology, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Whole Shine Medical Technology?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Whole Shine Medical Technology's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 44%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Whole Shine Medical Technology's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Whole Shine Medical Technology's P/S?

Whole Shine Medical Technology's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

We didn't quite envision Whole Shine Medical Technology's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Plus, you should also learn about these 2 warning signs we've spotted with Whole Shine Medical Technology (including 1 which makes us a bit uncomfortable).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com