BrightSpring Health Services, Inc.'s (NASDAQ:BTSG) Shares Leap 27% Yet They're Still Not Telling The Full Story

Those holding BrightSpring Health Services, Inc. (NASDAQ:BTSG) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Looking back a bit further, it's encouraging to see the stock is up 90% in the last year.

Although its price has surged higher, given about half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1x, you may still consider BrightSpring Health Services as an attractive investment with its 0.3x 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.

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View our latest analysis for BrightSpring Health Services

What Does BrightSpring Health Services' Recent Performance Look Like?

BrightSpring Health Services certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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 out of favour.

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

How Is BrightSpring Health Services' Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 31% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 69% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 8.5% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.0% per year, which is not materially different.

With this in consideration, we find it intriguing that BrightSpring Health Services' P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

The latest share price surge wasn't enough to lift BrightSpring Health Services' P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It looks to us like the P/S figures for BrightSpring Health Services remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider and we've discovered 2 warning signs for BrightSpring Health Services (1 shouldn't be ignored!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on BrightSpring Health Services, 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.