Sentiment Still Eluding Beijing Airdoc Technology Co., Ltd. (HKG:2251)

With a median price-to-sales (or "P/S") ratio of close to 4.5x in the Healthcare Services industry in Hong Kong, you could be forgiven for feeling indifferent about Beijing Airdoc Technology Co., Ltd.'s (HKG:2251) P/S ratio of 5.4x. 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.

See our latest analysis for Beijing Airdoc Technology

What Does Beijing Airdoc Technology's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Beijing Airdoc Technology has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Beijing Airdoc Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Beijing Airdoc Technology would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 79% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 51% each year over the next three years. That's shaping up to be materially higher than the 17% each year growth forecast for the broader industry.

In light of this, it's curious that Beijing Airdoc Technology's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

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.

Despite enticing revenue growth figures that outpace the industry, Beijing Airdoc Technology's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Beijing Airdoc Technology with six simple checks will allow you to discover any risks that could be an issue.

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.

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

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.