Investors Still Waiting For A Pull Back In Accolade, Inc. (NASDAQ:ACCD)
When you see that almost half of the companies in the Healthcare industry in the United States have price-to-sales ratios (or "P/S") below 1.3x, Accolade, Inc. (NASDAQ:ACCD) looks to be giving off some sell signals with its 2.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.
See our latest analysis for Accolade
How Has Accolade Performed Recently?
Accolade certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Accolade.
Is There Enough Revenue Growth Forecasted For Accolade?
Accolade's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.
Taking a look back first, we see that the company grew revenue by an impressive 17% last year. Pleasingly, revenue has also lifted 174% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Looking ahead now, revenue is anticipated to climb by 16% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 8.6% per annum, which is noticeably less attractive.
With this information, we can see why Accolade is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Final Word
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
As we suspected, our examination of Accolade's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Accolade, and understanding these should be part of your investment process.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.
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