ImExHS Limited (ASX:IME) Could Be Riskier Than It Looks
ImExHS Limited's (ASX:IME) price-to-sales (or "P/S") ratio of 1.5x might make it look like a strong buy right now compared to the Healthcare Services industry in Australia, where around half of the companies have P/S ratios above 4.2x and even P/S above 12x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.
Check out our latest analysis for ImExHS
What Does ImExHS' Recent Performance Look Like?
ImExHS could be doing better as it's been growing revenue less than most other companies lately. 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.
Keen to find out how analysts think ImExHS' future stacks up against the industry? In that case, our free report is a great place to start.
How Is ImExHS' Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as depressed as ImExHS' 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 28% last year. The latest three year period has also seen an excellent 123% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.
Looking ahead now, revenue is anticipated to climb by 24% each year during the coming three years according to the one analyst following the company. That's shaping up to be similar to the 22% per year growth forecast for the broader industry.
With this in consideration, we find it intriguing that ImExHS' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.
What Does ImExHS' P/S Mean For Investors?
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.
Our examination of ImExHS' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.
Before you take the next step, you should know about the 3 warning signs for ImExHS (1 makes us a bit uncomfortable!) that we have uncovered.
If you're unsure about the strength of ImExHS' 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.
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