The Market Doesn't Like What It Sees From Bausch Health Companies Inc.'s (NYSE:BHC) Revenues Yet As Shares Tumble 25%

Bausch Health Companies Inc. (NYSE:BHC) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 26% in that time.

Since its price has dipped substantially, Bausch Health Companies may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.3x, since almost half of all companies in the Pharmaceuticals industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 14x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

Check out our latest analysis for Bausch Health Companies

How Has Bausch Health Companies Performed Recently?

With revenue growth that's inferior to most other companies of late, Bausch Health Companies has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bausch Health Companies.

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

In order to justify its P/S ratio, Bausch Health Companies would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 11% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 3.9% per annum over the next three years. With the industry predicted to deliver 17% growth per year, the company is positioned for a weaker revenue result.

With this information, we can see why Bausch Health Companies 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.

What We Can Learn From Bausch Health Companies' P/S?

Bausch Health Companies' P/S looks about as weak as its stock price lately. 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 we suspected, our examination of Bausch Health Companies' 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. It's hard to see the share price rising strongly in the near future under these circumstances.

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

If you're unsure about the strength of Bausch Health Companies' 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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