Even With A 27% Surge, Cautious Investors Are Not Rewarding MedPlus Health Services Limited's (NSE:MEDPLUS) Performance Completely

MedPlus Health Services Limited (NSE:MEDPLUS) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 9.1% isn't as attractive.

Although its price has surged higher, you could still be forgiven for feeling indifferent about MedPlus Health Services' P/S ratio of 1.7x, since the median price-to-sales (or "P/S") ratio for the Consumer Retailing industry in India is about the same. 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.

Check out our latest analysis for MedPlus Health Services

What Does MedPlus Health Services' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, MedPlus Health Services has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on MedPlus Health Services will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For MedPlus Health Services?

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

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. Pleasingly, revenue has also lifted 72% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 16% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 6.6% each year, which is noticeably less attractive.

In light of this, it's curious that MedPlus Health Services' 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.

What We Can Learn From MedPlus Health Services' P/S?

MedPlus Health Services' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that MedPlus Health Services currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. 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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for MedPlus Health Services with six simple checks will allow you to discover any risks that could be an issue.

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

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.