Some Confidence Is Lacking In GoodRx Holdings, Inc. (NASDAQ:GDRX) As Shares Slide 27%

GoodRx Holdings, Inc. (NASDAQ:GDRX) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 67% loss during that time.

Although its price has dipped substantially, it's still not a stretch to say that GoodRx Holdings' price-to-sales (or "P/S") ratio of 2.3x right now seems quite "middle-of-the-road" compared to the Healthcare Services industry in the United States, seeing as it matches the P/S ratio of the wider industry. 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.

Check out our latest analysis for GoodRx Holdings

What Does GoodRx Holdings' Recent Performance Look Like?

GoodRx Holdings could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

GoodRx Holdings' 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.

Taking a look back first, we see that the company managed to grow revenues by a handy 2.8% last year. The latest three year period has also seen an excellent 97% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 9.3% per annum during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 18% per annum growth forecast for the broader industry.

In light of this, it's curious that GoodRx Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Final Word

With its share price dropping off a cliff, the P/S for GoodRx Holdings looks to be in line with the rest of the Healthcare Services industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Given that GoodRx Holdings' revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for GoodRx Holdings with six simple checks.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.