Stock Analysis

Investors Still Aren't Entirely Convinced By DIH Holding US, Inc.'s (NASDAQ:DHAI) Revenues Despite 76% Price Jump

NasdaqGM:DHAI
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DIH Holding US, Inc. (NASDAQ:DHAI) shares have continued their recent momentum with a 76% gain in the last month alone. But the last month did very little to improve the 73% share price decline over the last year.

Even after such a large jump in price, DIH Holding US' price-to-sales (or "P/S") ratio of 1.7x might still make it look like a buy right now compared to the Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 3.1x and even P/S above 7x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for DIH Holding US

ps-multiple-vs-industry
NasdaqGM:DHAI Price to Sales Ratio vs Industry June 18th 2024

How DIH Holding US Has Been Performing

Recent times have been quite advantageous for DIH Holding US as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on DIH Holding US 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 DIH Holding US will help you shine a light on its historical performance.

How Is DIH Holding US' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as DIH Holding US' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 44% gain to the company's top line. Pleasingly, revenue has also lifted 45% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 9.6% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that DIH Holding US' P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Key Takeaway

Despite DIH Holding US' share price climbing recently, its P/S still lags most other companies. 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.

Our examination of DIH Holding US revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Before you settle on your opinion, we've discovered 5 warning signs for DIH Holding US (1 is potentially serious!) that you should be aware of.

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).

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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.

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com