MedAdvisor Limited (ASX:MDR) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Looking back a bit further, it's encouraging to see the stock is up 50% in the last year.

In spite of the firm bounce in price, MedAdvisor may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.4x, considering almost half of all companies in the Healthcare Services industry in Australia have P/S ratios greater than 9.1x and even P/S higher than 30x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for MedAdvisor

How MedAdvisor Has Been Performing

Recent times haven't been great for MedAdvisor as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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.

Want the full picture on analyst estimates for the company? Then our free report on MedAdvisor will help you uncover what's on the horizon.

How Is MedAdvisor's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The latest three year period has also seen an excellent 215% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 15% per annum as estimated by the three analysts watching the company. That's shaping up to be materially lower than the 33% per year growth forecast for the broader industry.

In light of this, it's understandable that MedAdvisor's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Shares in MedAdvisor have risen appreciably however, its P/S is still subdued. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that MedAdvisor maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for MedAdvisor that you need to take into consideration.

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

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