The Pacific Smiles Group Ltd (ASX: PSQ) share price has certainly not had the best start to the day.
In morning trade the dental centre operator's shares are down 13% to $1.80.
What happened?
This morning Pacific Smiles provided the market with a trading update. As you might have guessed, it wasn't overly positive.
According to the release trading in April and May has been softer than expected. As a result, same centre patient fee growth is at 3.8% year-to-date, compared to its guidance for at least 5%.
Unfortunately the company appears to believe things will get worse before they get better and has revised its full-year same centre patient fee growth guidance to 3%.
Further to this, management has had to downgrade its full-year underlying EBITDA guidance to between $20.4 million and $21 million, from $21.7 million and $23.2 million.
The soft trading appears to be a nationwide trend, with management advising that no single dental centre cohort or geographic region has contributed to the decline.
In light of these weak trading conditions, I wouldn't be surprised to see the shares of rival 1300 Smiles Limited (ASX: ONT) and dental products provider SDI Limited (ASX: SDI) also come under pressure today.
Should you invest?
Even after today's decline Pacific Smiles' shares are changing hands at approximately 27x trailing earnings.
I feel this is quite expensive given the soft trading environment and its current outlook.
Although a long way out still and things are likely to change, management has forecast FY 2018 EBITDA growth of around 10%. In my opinion this isn't sufficient to justify an investment at the current share price.
