With a price-to-sales (or "P/S") ratio of 0.1x Owens & Minor, Inc. (NYSE:OMI) may be sending bullish signals at the moment, given that almost half of all the Healthcare companies in the United States have P/S ratios greater than 1x and even P/S higher than 3x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Owens & Minor

How Has Owens & Minor Performed Recently?

Recent times haven't been great for Owens & Minor as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Owens & Minor's Revenue Growth Trending?

Owens & Minor's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 3.6% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 23% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 3.6% as estimated by the five analysts watching the company. That's shaping up to be materially lower than the 7.1% growth forecast for the broader industry.

With this in consideration, its clear as to why Owens & Minor's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Owens & Minor's P/S

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.

We've established that Owens & Minor maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Owens & Minor you should know about.

If these risks are making you reconsider your opinion on Owens & Minor, explore our interactive list of high quality stocks to get an idea of what else is out there.

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