Benign Growth For Alcidion Group Limited (ASX:ALC) Underpins Its Share Price
With a price-to-sales (or "P/S") ratio of 2.6x Alcidion Group Limited (ASX:ALC) may be sending very bullish signals at the moment, given that almost half of all the Healthcare Services companies in Australia have P/S ratios greater than 5.9x and even P/S higher than 21x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.
View our latest analysis for Alcidion Group
What Does Alcidion Group's P/S Mean For Shareholders?
Recent times haven't been great for Alcidion Group as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.
Keen to find out how analysts think Alcidion Group's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Any Revenue Growth Forecasted For Alcidion Group?
The only time you'd be truly comfortable seeing a P/S as depressed as Alcidion Group's is when the company's growth is on track to lag the industry decidedly.
Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an excellent 117% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Looking ahead now, revenue is anticipated to climb by 11% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 49% per year, which is noticeably more attractive.
In light of this, it's understandable that Alcidion Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
What We Can Learn From Alcidion Group'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 Alcidion Group 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. It's hard to see the share price rising strongly in the near future under these circumstances.
And what about other risks? Every company has them, and we've spotted 2 warning signs for Alcidion Group you should know about.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.
