There wouldn't be many who think Regis Healthcare Limited's (ASX:REG) price-to-sales (or "P/S") ratio of 1.8x is worth a mention when the median P/S for the Healthcare industry in Australia is similar at about 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Regis Healthcare

What Does Regis Healthcare's Recent Performance Look Like?

Regis Healthcare certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Some Revenue Growth Forecasted For Regis Healthcare?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Regis Healthcare's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. The latest three year period has also seen an excellent 45% 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 8.8% per year during the coming three years according to the seven analysts following the company. With the industry predicted to deliver 12% growth per annum, the company is positioned for a weaker revenue result.

In light of this, it's curious that Regis Healthcare's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From Regis Healthcare's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

When you consider that Regis Healthcare's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. A positive change is needed in order to justify the current price-to-sales ratio.

You should always think about risks. Case in point, we've spotted 1 warning sign for Regis Healthcare 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.

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.