Investors Aren't Entirely Convinced By Brookdale Senior Living Inc.'s (NYSE:BKD) Revenues

When you see that almost half of the companies in the Healthcare industry in the United States have price-to-sales ratios (or "P/S") above 1.2x, Brookdale Senior Living Inc. (NYSE:BKD) looks to be giving off some buy signals with its 0.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Brookdale Senior Living

What Does Brookdale Senior Living's Recent Performance Look Like?

Recent revenue growth for Brookdale Senior Living has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Brookdale Senior Living's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Brookdale Senior Living'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.

If we review the last year of revenue growth, the company posted a worthy increase of 10%. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 16% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 9.5% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 7.4% growth forecast for the broader industry.

In light of this, it's peculiar that Brookdale Senior Living's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

A look at Brookdale Senior Living's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Brookdale Senior Living that you should be aware of.

If you're unsure about the strength of Brookdale Senior Living'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.