Aveanna Healthcare Holdings Inc.'s (NASDAQ:AVAH) Shares Bounce 45% But Its Business Still Trails The Industry

Aveanna Healthcare Holdings Inc. (NASDAQ:AVAH) shares have continued their recent momentum with a 45% gain in the last month alone. The last month tops off a massive increase of 295% in the last year.

Even after such a large jump in price, considering around 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 Aveanna Healthcare Holdings as an solid investment opportunity with its 0.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Aveanna Healthcare Holdings

What Does Aveanna Healthcare Holdings' Recent Performance Look Like?

Recent times haven't been great for Aveanna Healthcare Holdings as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Aveanna Healthcare Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 6.6% gain to the company's revenues. The latest three year period has also seen a 19% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 4.7% during the coming year according to the seven analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 7.6%, which is noticeably more attractive.

In light of this, it's understandable that Aveanna Healthcare Holdings' 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 Does Aveanna Healthcare Holdings' P/S Mean For Investors?

Aveanna Healthcare Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

As expected, our analysis of Aveanna Healthcare Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Aveanna Healthcare Holdings that you should be aware of.

If these risks are making you reconsider your opinion on Aveanna Healthcare Holdings, 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.