Not Many Are Piling Into C-MER Medical Holdings Limited (HKG:3309) Stock Yet As It Plummets 27%

To the annoyance of some shareholders, C-MER Medical Holdings Limited (HKG:3309) shares are down a considerable 27% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 49% share price drop.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about C-MER Medical Holdings' P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in Hong Kong is also close to 0.9x. 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.

View our latest analysis for C-MER Medical Holdings

How Has C-MER Medical Holdings Performed Recently?

C-MER Medical Holdings has been doing a decent job lately as it's been growing revenue at a reasonable pace. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on C-MER Medical Holdings will help you shine a light on its historical performance.

How Is C-MER Medical Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, C-MER Medical Holdings would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 5.3% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 98% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 13% shows it's noticeably more attractive.

In light of this, it's curious that C-MER Medical Holdings' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On C-MER Medical Holdings' P/S

C-MER Medical Holdings' 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.

To our surprise, C-MER Medical Holdings revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for C-MER Medical Holdings with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on C-MER Medical Holdings, 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.