Not Many Are Piling Into InnovAge Holding Corp. (NASDAQ:INNV) Just Yet
It's not a stretch to say that InnovAge Holding Corp.'s (NASDAQ:INNV) price-to-sales (or "P/S") ratio of 1.4x right now seems quite "middle-of-the-road" for companies in the Healthcare industry in the United States, where the median P/S ratio is around 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
View our latest analysis for InnovAge Holding
What Does InnovAge Holding's Recent Performance Look Like?
With revenue growth that's inferior to most other companies of late, InnovAge Holding has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
Want the full picture on analyst estimates for the company? Then our free report on InnovAge Holding will help you uncover what's on the horizon.
Is There Some Revenue Growth Forecasted For InnovAge Holding?
In order to justify its P/S ratio, InnovAge Holding would need to produce growth that's similar to the industry.
If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Regardless, revenue has managed to lift by a handy 21% in aggregate from three years ago, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.
Turning to the outlook, the next three years should generate growth of 23% each year as estimated by the four analysts watching the company. With the industry only predicted to deliver 8.7% per year, the company is positioned for a stronger revenue result.
In light of this, it's curious that InnovAge Holding's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Key Takeaway
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.
Despite enticing revenue growth figures that outpace the industry, InnovAge Holding'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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.
The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for InnovAge Holding with six simple checks will allow you to discover any risks that could be an issue.
If these risks are making you reconsider your opinion on InnovAge Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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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