Vitalhub Corp. (TSE:VHI) Soars 25% But It's A Story Of Risk Vs Reward

Vitalhub Corp. (TSE:VHI) shares have continued their recent momentum with a 25% gain in the last month alone. The last month tops off a massive increase of 229% in the last year.

Although its price has surged higher, Vitalhub may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 7.6x, considering almost half of all companies in the Healthcare Services industry in Canada have P/S ratios greater than 9.6x and even P/S higher than 64x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Vitalhub

How Has Vitalhub Performed Recently?

Vitalhub could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Vitalhub.

How Is Vitalhub's Revenue Growth Trending?

Vitalhub's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. The strong recent performance means it was also able to grow revenue by 201% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 19% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.6%, which is noticeably less attractive.

In light of this, it's peculiar that Vitalhub's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Vitalhub's P/S?

Despite Vitalhub's share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To us, it seems Vitalhub currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you settle on your opinion, we've discovered 2 warning signs for Vitalhub that you should be aware of.

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.