The Market Doesn't Like What It Sees From Healthcare Triangle, Inc.'s (NASDAQ:HCTI) Revenues Yet As Shares Tumble 33%

Explore Healthcare Triangle's Fair Values from the Community and select yours

To the annoyance of some shareholders, Healthcare Triangle, Inc. (NASDAQ:HCTI) shares are down a considerable 33% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 97% share price decline.

Following the heavy fall in price, Healthcare Triangle may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.7x, since almost half of all companies in the Healthcare Services industry in the United States have P/S ratios greater than 2.7x and even P/S higher than 6x are not unusual. 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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Check out our latest analysis for Healthcare Triangle

How Healthcare Triangle Has Been Performing

As an illustration, revenue has deteriorated at Healthcare Triangle over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic 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 Healthcare Triangle will help you shine a light on its historical performance.

How Is Healthcare Triangle's Revenue Growth Trending?

Healthcare Triangle's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 59% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 71% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

In contrast to the company, the rest of the industry is expected to grow by 10% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why Healthcare Triangle'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

Healthcare Triangle's recently weak share price has pulled its P/S back below other Healthcare Services 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 Healthcare Triangle confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Healthcare Triangle is showing 5 warning signs in our investment analysis, and 4 of those are concerning.

If you're unsure about the strength of Healthcare Triangle'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.