Insufficient Growth At Pediatrix Medical Group, Inc. (NYSE:MD) Hampers Share Price

Pediatrix Medical Group, Inc.'s (NYSE:MD) price-to-sales (or "P/S") ratio of 0.5x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Healthcare industry in the United States have P/S ratios greater than 1.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for Pediatrix Medical Group

How Has Pediatrix Medical Group Performed Recently?

With revenue growth that's inferior to most other companies of late, Pediatrix Medical Group has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Pediatrix Medical Group?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Regardless, revenue has managed to lift by a handy 5.3% in aggregate from three years ago, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 0.01% per year as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.1% per year, which is noticeably more attractive.

With this information, we can see why Pediatrix Medical Group is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

As expected, our analysis of Pediatrix Medical Group's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Pediatrix Medical Group with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Pediatrix Medical 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.