Pediatrix Medical Group, Inc.'s (NYSE:MD) Price Is Right But Growth Is Lacking

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 1.1x, Pediatrix Medical Group, Inc. (NYSE:MD) looks to be giving off some buy signals with its 0.4x 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 Pediatrix Medical Group

What Does Pediatrix Medical Group's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Pediatrix Medical Group has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Pediatrix Medical Group's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Fortunately, a few good years before that means that it was still able to grow revenue by 15% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 3.3% per annum during the coming three years according to the eight analysts following the company. With the industry predicted to deliver 7.7% growth per annum, the company is positioned for a weaker revenue result.

With this information, we can see why Pediatrix Medical Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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.

We've established that Pediatrix Medical Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Pediatrix Medical Group that you need to be mindful of.

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.