Even With A 49% Surge, Cautious Investors Are Not Rewarding The Oncology Institute, Inc.'s (NASDAQ:TOI) Performance Completely
Despite an already strong run, The Oncology Institute, Inc. (NASDAQ:TOI) shares have been powering on, with a gain of 49% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Oncology Institute's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in the United States is also close to 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
Check out our latest analysis for Oncology Institute
How Oncology Institute Has Been Performing
Recent times have been advantageous for Oncology Institute as its revenues have been rising faster 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Keen to find out how analysts think Oncology Institute's future stacks up against the industry? In that case, our free report is a great place to start.
Is There Some Revenue Growth Forecasted For Oncology Institute?
In order to justify its P/S ratio, Oncology Institute would need to produce growth that's similar to the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 33%. The latest three year period has also seen an excellent 65% 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.
Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 12% over the next year. That's shaping up to be materially higher than the 7.2% growth forecast for the broader industry.
With this information, we find it interesting that Oncology Institute is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.
What Does Oncology Institute's P/S Mean For Investors?
Oncology Institute appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Looking at Oncology Institute's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.
Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Oncology Institute (1 is potentially serious) you should be aware of.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.
