Even With A 30% Surge, Cautious Investors Are Not Rewarding Alignment Healthcare, Inc.'s (NASDAQ:ALHC) Performance Completely

The Alignment Healthcare, Inc. (NASDAQ:ALHC) share price has done very well over the last month, posting an excellent gain of 30%. Looking back a bit further, it's encouraging to see the stock is up 100% in the last year.

Although its price has surged higher, it's still not a stretch to say that Alignment Healthcare's price-to-sales (or "P/S") ratio of 0.9x right now seems quite "middle-of-the-road" compared to 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 Alignment Healthcare

How Alignment Healthcare Has Been Performing

With revenue growth that's superior to most other companies of late, Alignment Healthcare has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on Alignment Healthcare will help you uncover what's on the horizon.

How Is Alignment Healthcare's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Alignment Healthcare's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 37%. The strong recent performance means it was also able to grow revenue by 109% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 25% each year during the coming three years according to the ten analysts following the company. With the industry only predicted to deliver 7.4% per annum, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Alignment Healthcare is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Alignment Healthcare's P/S

Its shares have lifted substantially and now Alignment Healthcare's P/S is back within range of the industry median. 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.

Despite enticing revenue growth figures that outpace the industry, Alignment Healthcare'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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Alignment Healthcare you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.