Why Investors Shouldn't Be Surprised By Aesthetic Medical International Holdings Group Limited's (NASDAQ:AIH) 27% Share Price Plunge

Aesthetic Medical International Holdings Group Limited (NASDAQ:AIH) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 66% loss during that time.

Since its price has dipped substantially, Aesthetic Medical International Holdings Group may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Healthcare industry in the United States have P/S ratios greater than 0.9x and even P/S higher than 3x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Aesthetic Medical International Holdings Group

What Does Aesthetic Medical International Holdings Group's P/S Mean For Shareholders?

For example, consider that Aesthetic Medical International Holdings Group's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. Those who are bullish on Aesthetic Medical International Holdings Group will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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

Is There Any Revenue Growth Forecasted For Aesthetic Medical International Holdings Group?

The only time you'd be truly comfortable seeing a P/S as low as Aesthetic Medical International Holdings Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 4.0% decrease to the company's top line. As a result, revenue from three years ago have also fallen 11% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 7.2% shows it's an unpleasant look.

In light of this, it's understandable that Aesthetic Medical International Holdings Group's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Final Word

The southerly movements of Aesthetic Medical International Holdings Group's shares means its P/S is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Aesthetic Medical International Holdings Group maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You need to take note of risks, for example - Aesthetic Medical International Holdings Group has 4 warning signs (and 3 which are significant) we think you should know about.

If these risks are making you reconsider your opinion on Aesthetic Medical International Holdings Group, 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.