To the annoyance of some shareholders, DIH Holding US, Inc. (NASDAQ:DHAI) shares are down a considerable 54% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 84% share price decline.

After such a large drop in price, DIH Holding US' price-to-sales (or "P/S") ratio of 0.1x might make it look like a strong buy right now compared to the wider Medical Equipment industry in the United States, where around half of the companies have P/S ratios above 2.9x and even P/S above 6x are quite common. 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.

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View our latest analysis for DIH Holding US

What Does DIH Holding US' Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for DIH Holding US, which is generally not a bad outcome. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on DIH Holding US will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as depressed as DIH Holding US' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a decent 5.4% gain to the company's revenues. The latest three year period has also seen an excellent 42% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is only predicted to deliver 10% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's peculiar that DIH Holding US' P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On DIH Holding US' P/S

DIH Holding US' P/S looks about as weak as its stock price lately. 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 DIH Holding US revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

You always need to take note of risks, for example - DIH Holding US has 3 warning signs we think you should be aware of.

If you're unsure about the strength of DIH Holding US' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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