Maternus-Kliniken Aktiengesellschaft's (ETR:MAK) 25% Share Price Plunge Could Signal Some Risk

Maternus-Kliniken Aktiengesellschaft (ETR:MAK) shares have had a horrible month, losing 25% after a relatively good period beforehand. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 59% loss during that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Maternus-Kliniken's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in Germany is also close to 0.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Maternus-Kliniken

What Does Maternus-Kliniken's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Maternus-Kliniken over the last year, which is not ideal at all. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Maternus-Kliniken's earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

Maternus-Kliniken's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.1%. As a result, revenue from three years ago have also fallen 10% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to decline by 0.1% over the next year, or less than the company's recent medium-term annualised revenue decline.

With this information, it's perhaps strange that Maternus-Kliniken is trading at a fairly similar P/S in comparison. With revenue going quickly in reverse, it's not guaranteed that the P/S has found a floor yet. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Key Takeaway

Maternus-Kliniken's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Maternus-Kliniken currently trades on a higher than expected P/S since its recent three-year revenues are even worse than the forecasts for a struggling industry. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. We're also cautious about the company's ability to stay its recent medium-term course and resist even greater pain to its business from the broader industry turmoil. Unless the company's relative performance improves, it's challenging to accept these prices as being reasonable.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Maternus-Kliniken (2 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Maternus-Kliniken, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.