Investors Still Aren't Entirely Convinced By Nutex Health Inc.'s (NASDAQ:NUTX) Revenues Despite 27% Price Jump
Those holding Nutex Health Inc. (NASDAQ:NUTX) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 79% share price drop in the last twelve months.
Even after such a large jump in price, there still wouldn't be many who think Nutex Health's price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S in the United States' Healthcare industry is similar at about 1.1x. 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.
View our latest analysis for Nutex Health
What Does Nutex Health's P/S Mean For Shareholders?
Recent times haven't been great for Nutex Health as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Nutex Health will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The P/S?
Nutex Health's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 15% drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 30% 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 Nutex Health 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.
The Bottom Line On Nutex Health's P/S
Nutex Health appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Despite enticing revenue growth figures that outpace the industry, Nutex Health's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Nutex Health, and understanding these should be part of your investment process.
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.
