medmix AG’s (VTX:MEDX) Business And Shares Still Trailing The Industry

When you see that almost half of the companies in the Medical Equipment industry in Switzerland have price-to-sales ratios (or “P/S”) above 3.9x, medmix AG (VTX:MEDX) looks to be giving off very strong buy signals with its 0.8x P/S ratio. However, the P/S might be quite low for a reason and it requires further investigation to determine if it’s justified.

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What Does medmix’s P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, medmix’s revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor 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 medmix’s future stacks up against the industry? In that case, our free report is a great place to start .

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, medmix would need to produce anemic growth that’s substantially trailing the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 5.8% in total over the last three years. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 3.5% per year as estimated by the two analysts watching the company. With the industry predicted to deliver 7.4% growth each year, the company is positioned for a weaker revenue result.

With this information, we can see why medmix is trading at a P/S lower than the industry. Apparently many shareholders weren’t comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On medmix’s P/S

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.

As we suspected, our examination of medmix’s analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

Don’t forget that there may be other risks. For instance, we’ve identified 2 warning signs for medmix that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.