Shares of Healthscope Ltd (ASX: HSO) have been absolutely hammered recently. Although they have managed to regain 1.3% today (trading at $2.27 per share) they are still an agonising 22.5% below their closing price from Thursday last week.

What happened to Healthscope?

It was less than one month ago that Healthscope’s shares were trading at an all-time high of $3.17, up from an offer price of $2.10 when the group listed its shares on the ASX in July 2014. At that price, they were trading on a multiple of more than 30x trailing earnings, reflecting the strong growth that had been baked into the group’s share price.

Unfortunately, Healthscope gave investors reason to doubt its growth prospects when it held its Annual General Meeting late last week. In an update to the market, it said it had experienced slower-than-expected revenue growth in its Hospitals division during the first quarter of financial year 2017.

It noted: “Various data points across the industry tell us that the average rate of hospital volume growth generally has slowed. We have seen this impact a number of our hospitals resulting in increased variability in volumes and case mix month to month in the first quarter and particularly in September. Management focus continues to be on driving revenue growth and disciplined cost control.”

It also said that earnings growth (based on EBITDA, or earnings before interest, tax, depreciation and amortisation) from its Hospitals division would be flat year-on-year if the trend for the first quarter was to continue.

Notably, shares of Healthscope rival, Ramsay Health Care Limited (ASX: RHC), have also shed more than 9% over the same period, likely reflecting investors’ concerns that Healthscope’s woes are not company-specific and, instead, apply to the industry as a whole.

Should you buy?

Healthscope was looking pricey when it traded above $3 per share, but now that it has cooled down it’s worthy of a closer look. That said, the shares are still trading on a price to earnings ratio of almost 22x last year’s earnings, which isn’t a bargain if slower growth does become more commonplace for the private hospital operator. This is something prospective investors should bear in mind.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.