Owens & Minor, Inc.'s (NYSE:OMI) Revenues Are Not Doing Enough For Some Investors

When close to half the companies operating in the Healthcare industry in the United States have price-to-sales ratios (or "P/S") above 1.2x, you may consider Owens & Minor, Inc. (NYSE:OMI) as an attractive investment with its 0.1x 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 Owens & Minor

What Does Owens & Minor's P/S Mean For Shareholders?

Owens & Minor could be doing better as it's been growing revenue less than most other companies lately. 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 Owens & Minor's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Owens & Minor would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 3.9% gain to the company's revenues. Revenue has also lifted 12% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 4.9% per annum over the next three years. That's shaping up to be materially lower than the 7.4% per annum growth forecast for the broader industry.

With this information, we can see why Owens & Minor 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.

What We Can Learn From Owens & Minor's P/S?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Owens & Minor's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. 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 Owens & Minor that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.