Terveystalo Oyj's (HEL:TTALO) P/S Still Appears To Be Reasonable

It's not a stretch to say that Terveystalo Oyj's (HEL:TTALO) price-to-sales (or "P/S") ratio of 1x right now seems quite "middle-of-the-road" for companies in the Healthcare industry in Finland, where the median P/S ratio is around 0.7x. 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.

View our latest analysis for Terveystalo Oyj

What Does Terveystalo Oyj's Recent Performance Look Like?

There hasn't been much to differentiate Terveystalo Oyj's and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on Terveystalo Oyj will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Terveystalo Oyj.

How Is Terveystalo Oyj's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 3.9%. The latest three year period has also seen a 20% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 3.2% each year over the next three years. With the industry predicted to deliver 4.9% growth each year, the company is positioned for a comparable revenue result.

With this information, we can see why Terveystalo Oyj is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Terveystalo Oyj's P/S

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.

A Terveystalo Oyj's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Healthcare industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Plus, you should also learn about this 1 warning sign we've spotted with Terveystalo Oyj.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.