The Market Doesn't Like What It Sees From New Ray Medicine International Holding Limited's (HKG:6108) Revenues Yet As Shares Tumble 32%

The New Ray Medicine International Holding Limited (HKG:6108) share price has fared very poorly over the last month, falling by a substantial 32%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 38% in that time.

Following the heavy fall in price, considering around half the companies operating in Hong Kong's Healthcare industry have price-to-sales ratios (or "P/S") above 1x, you may consider New Ray Medicine International Holding as an solid investment opportunity with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for New Ray Medicine International Holding

How New Ray Medicine International Holding Has Been Performing

Recent times have been quite advantageous for New Ray Medicine International Holding as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. 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 out of favour.

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 New Ray Medicine International Holding's earnings, revenue and cash flow.

How Is New Ray Medicine International Holding's Revenue Growth Trending?

In order to justify its P/S ratio, New Ray Medicine International Holding would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 240% gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 32% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 10% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we understand why New Ray Medicine International Holding's P/S is lower than most of its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

New Ray Medicine International Holding's recently weak share price has pulled its P/S back below other Healthcare companies. 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.

As we suspected, our examination of New Ray Medicine International Holding revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Before you settle on your opinion, we've discovered 1 warning sign for New Ray Medicine International Holding that you should be aware of.

If you're unsure about the strength of New Ray Medicine International Holding's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.