There's Reason For Concern Over Clover Health Investments, Corp.'s (NASDAQ:CLOV) Massive 37% Price Jump

Clover Health Investments, Corp. (NASDAQ:CLOV) shares have continued their recent momentum with a 37% gain in the last month alone. The last month tops off a massive increase of 242% in the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Clover Health Investments' P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Healthcare industry in the United States is also close to 1.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Clover Health Investments

How Clover Health Investments Has Been Performing

While the industry has experienced revenue growth lately, Clover Health Investments' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Clover Health Investments?

Clover Health Investments' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 14% decrease to the company's top line. Even so, admirably revenue has lifted 127% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 8.3% per year over the next three years. With the industry predicted to deliver 7.4% growth per annum, that's a disappointing outcome.

With this information, we find it concerning that Clover Health Investments is trading at a fairly similar P/S compared to the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

What Does Clover Health Investments' P/S Mean For Investors?

Clover Health Investments appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

While Clover Health Investments' P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Plus, you should also learn about these 3 warning signs we've spotted with Clover Health Investments (including 1 which can't be ignored).

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.