Meinian Onehealth Healthcare Holdings Co., Ltd. (SZSE:002044) shares have continued their recent momentum with a 28% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

Even after such a large jump in price, there still wouldn't be many who think Meinian Onehealth Healthcare Holdings' price-to-sales (or "P/S") ratio of 1.8x is worth a mention when it essentially matches the median P/S in China's Healthcare industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Meinian Onehealth Healthcare Holdings Has Been Performing

Meinian Onehealth Healthcare Holdings' revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

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

The only time you'd be comfortable seeing a P/S like Meinian Onehealth Healthcare Holdings' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.3% last year. The latest three year period has also seen a 16% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 16% as estimated by the five analysts watching the company. With the industry predicted to deliver 14% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Meinian Onehealth Healthcare Holdings' P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Its shares have lifted substantially and now Meinian Onehealth Healthcare Holdings' P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look at Meinian Onehealth Healthcare Holdings' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Meinian Onehealth Healthcare Holdings with six simple checks will allow you to discover any risks that could be an issue.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.