Market Participants Recognise WELL Health Technologies Corp.'s (TSE:WELL) Revenues Pushing Shares 30% Higher

The WELL Health Technologies Corp. (TSE:WELL) share price has done very well over the last month, posting an excellent gain of 30%. Looking further back, the 11% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, you could be forgiven for thinking WELL Health Technologies is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.4x, considering almost half the companies in Canada's Healthcare industry have P/S ratios below 0.7x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for WELL Health Technologies

How Has WELL Health Technologies Performed Recently?

Recent times have been advantageous for WELL Health Technologies as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

WELL Health Technologies' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 37%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 11% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.1% per annum, which is noticeably less attractive.

In light of this, it's understandable that WELL Health Technologies' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The large bounce in WELL Health Technologies' shares has lifted the company's P/S handsomely. 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.

As we suspected, our examination of WELL Health Technologies' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 4 warning signs for WELL Health Technologies (1 is a bit unpleasant!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on WELL Health Technologies, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com