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Hydreight Technologies Inc. (CVE:NURS) Soars 25% But It's A Story Of Risk Vs Reward
Despite an already strong run, Hydreight Technologies Inc. (CVE:NURS) shares have been powering on, with a gain of 25% in the last thirty days. The last 30 days were the cherry on top of the stock's 669% gain in the last year, which is nothing short of spectacular.
Although its price has surged higher, Hydreight Technologies' price-to-sales (or "P/S") ratio of 5.8x might still make it look like a buy right now compared to the Healthcare Services industry in Canada, where around half of the companies have P/S ratios above 11.5x and even P/S above 213x are quite common. 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 Hydreight Technologies
How Has Hydreight Technologies Performed Recently?
Recent times have been quite advantageous for Hydreight Technologies as its revenue has been rising very briskly. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Hydreight Technologies will help you shine a light on its historical performance.Is There Any Revenue Growth Forecasted For Hydreight Technologies?
There's an inherent assumption that a company should underperform the industry for P/S ratios like Hydreight Technologies' to be considered reasonable.
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. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 10% shows it's noticeably more attractive.
In light of this, it's peculiar that Hydreight Technologies' P/S sits below the majority of other companies. It looks like most investors are not convinced the company can maintain its recent growth rates.
The Final Word
The latest share price surge wasn't enough to lift Hydreight Technologies' P/S close to the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.
Our examination of Hydreight Technologies revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.
Before you settle on your opinion, we've discovered 4 warning signs for Hydreight Technologies (1 makes us a bit uncomfortable!) that you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
Valuation is complex, but we're here to simplify it.
Discover if Hydreight Technologies might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About TSXV:NURS
Hydreight Technologies
Provides operates in the digital health technology sector in the United States.
Excellent balance sheet slight.
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