TATA Health International Holdings Limited (HKG:1255) shares have had a horrible month, losing 36% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 58% share price decline.
Even after such a large drop in price, it's still not a stretch to say that TATA Health International Holdings' price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Specialty Retail industry in Hong Kong, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for TATA Health International Holdings
How Has TATA Health International Holdings Performed Recently?
The revenue growth achieved at TATA Health International Holdings over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Although there are no analyst estimates available for TATA Health International Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Do Revenue Forecasts Match The P/S Ratio?
There's an inherent assumption that a company should be matching the industry for P/S ratios like TATA Health International Holdings' to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 22% last year. Still, revenue has fallen 19% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.
Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 16% shows it's an unpleasant look.
With this in mind, we find it worrying that TATA Health International Holdings' P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.
The Bottom Line On TATA Health International Holdings' P/S
Following TATA Health International Holdings' share price tumble, its P/S is just clinging on to the industry median P/S. 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.
The fact that TATA Health International Holdings currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for TATA Health International Holdings that you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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在TATA Health International Holdings股價暴跌之後,其市銷率僅保持在行業中位數水平。通常,在做出投資決策時,我們謹慎行事,不要過多地解讀市售比率,儘管這可以揭示其他市場參與者對公司的看法。
TATA Health International Holdings目前的市銷率與該行業其他公司持平,這一事實令我們感到驚訝,因爲其最近的收入在中期內一直在下降,而該行業仍將增長。在行業預測不斷增長的背景下,當我們看到收入倒退時,預計股價可能會下跌,從而使溫和的市銷率走低是合理的。如果最近的中期收入趨勢繼續下去,將使股東的投資面臨風險,潛在投資者面臨支付不必要的溢價的危險。