Investors Still Aren't Entirely Convinced By MedservRegis p.l.c.'s (MTSE:MDS) Revenues Despite 32% Price Jump

Despite an already strong run, MedservRegis p.l.c. (MTSE:MDS) shares have been powering on, with a gain of 32% in the last thirty days. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, there still wouldn't be many who think MedservRegis' price-to-sales (or "P/S") ratio of 0.8x is worth a mention when it essentially matches the median P/S in Malta's Energy Services industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for MedservRegis

How MedservRegis Has Been Performing

We'd have to say that with no tangible growth over the last year, MedservRegis' revenue has been unimpressive. It might be that many expect the uninspiring revenue performance to only match most other companies at best over the coming period, which has kept the P/S from rising. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

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

How Is MedservRegis' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like MedservRegis' to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Despite the lack of growth, the company was still able to deliver immense revenue growth over the last three years. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 5.7% shows it's noticeably more attractive.

In light of this, it's curious that MedservRegis' 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.

What Does MedservRegis' P/S Mean For Investors?

MedservRegis' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

To our surprise, MedservRegis 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. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. 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.

It is also worth noting that we have found 2 warning signs for MedservRegis (1 is a bit concerning!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.