With a median price-to-sales (or "P/S") ratio of close to 2.3x in the Healthcare industry in China, you could be forgiven for feeling indifferent about Meinian Onehealth Healthcare Holdings Co., Ltd.'s (SZSE:002044) P/S ratio, which comes in at about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Meinian Onehealth Healthcare Holdings

How Has Meinian Onehealth Healthcare Holdings Performed Recently?

Recent revenue growth for Meinian Onehealth Healthcare Holdings has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

How Is Meinian Onehealth Healthcare Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Meinian Onehealth Healthcare Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 9.0%. The latest three year period has also seen an excellent 49% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 17% as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 20%, which is noticeably more attractive.

With this information, we find it interesting that Meinian Onehealth Healthcare Holdings is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Final Word

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.

Given that Meinian Onehealth Healthcare Holdings' revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

It is also worth noting that we have found 1 warning sign for Meinian Onehealth Healthcare Holdings that you need to take into consideration.

If you're unsure about the strength of Meinian Onehealth Healthcare Holdings' 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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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.