Even With A 30% Surge, Cautious Investors Are Not Rewarding BrightSpring Health Services, Inc.'s (NASDAQ:BTSG) Performance Completely

BrightSpring Health Services, Inc. (NASDAQ:BTSG) shares have had a really impressive month, gaining 30% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 98%.

In spite of the firm bounce 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 BrightSpring Health Services as an enticing stock to check out with its 0.4x 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.

View our latest analysis for BrightSpring Health Services

How BrightSpring Health Services Has Been Performing

BrightSpring Health Services certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic 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 BrightSpring Health Services.

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 26% gain to the company's top line. The latest three year period has also seen an excellent 66% overall rise in revenue, aided by its short-term performance. 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 twelve analysts watching the company. That's shaping up to be similar to the 8.3% each year growth forecast for the broader industry.

With this information, we find it odd that BrightSpring Health Services is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On BrightSpring Health Services' P/S

Despite BrightSpring Health Services' share price climbing recently, its P/S still lags most other companies. 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.

We've seen that BrightSpring Health Services currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for BrightSpring Health Services with six simple checks on some of these key factors.

If you're unsure about the strength of BrightSpring Health Services' 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.