Those holding Aesthetic Medical International Holdings Group Limited (NASDAQ:AIH) shares would be relieved that the share price has rebounded 31% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 63% share price decline over the last year.

Although its price has surged higher, when close to half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Aesthetic Medical International Holdings Group as an enticing stock to check out with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How Has Aesthetic Medical International Holdings Group Performed Recently?

It looks like revenue growth has deserted Aesthetic Medical International Holdings Group recently, which is not something to boast about. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. Those who are bullish on Aesthetic Medical International Holdings Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

How Is Aesthetic Medical International Holdings Group's Revenue Growth Trending?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 24% drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 7.7% shows it's an unpleasant look.

With this information, we are not surprised that Aesthetic Medical International Holdings Group is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Aesthetic Medical International Holdings Group's P/S

The latest share price surge wasn't enough to lift Aesthetic Medical International Holdings Group's P/S close to the industry median. 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.

It's no surprise that Aesthetic Medical International Holdings Group maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 4 warning signs for Aesthetic Medical International Holdings Group (2 are significant!) that we have uncovered.

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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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.