AdaptHealth Corp.'s (NASDAQ:AHCO) Share Price Boosted 26% But Its Business Prospects Need A Lift Too

AdaptHealth Corp. (NASDAQ:AHCO) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 6.5% isn't as impressive.

Even after such a large jump in price, when close to half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider AdaptHealth as an enticing stock to check out with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for AdaptHealth

How Has AdaptHealth Performed Recently?

AdaptHealth could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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.

Keen to find out how analysts think AdaptHealth's future stacks up against the industry? In that case, our free report is a great place to start.

How Is AdaptHealth's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as AdaptHealth's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 6.1%. This was backed up an excellent period prior to see revenue up by 87% 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 3.0% as estimated by the nine analysts watching the company. That's shaping up to be materially lower than the 7.6% growth forecast for the broader industry.

In light of this, it's understandable that AdaptHealth's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

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

Despite AdaptHealth's share price climbing recently, its P/S still lags most other companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of AdaptHealth's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for AdaptHealth with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of AdaptHealth's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.