Improved Revenues Required Before Health Catalyst, Inc. (NASDAQ:HCAT) Shares Find Their Feet

You may think that with a price-to-sales (or "P/S") ratio of 0.8x Health Catalyst, Inc. (NASDAQ:HCAT) is definitely a stock worth checking out, seeing as almost half of all the Healthcare Services companies in the United States have P/S ratios greater than 3.3x and even P/S above 17x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Health Catalyst

How Has Health Catalyst Performed Recently?

Health Catalyst could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 Health Catalyst.

Is There Any Revenue Growth Forecasted For Health Catalyst?

In order to justify its P/S ratio, Health Catalyst would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.5%. 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 0.4% per annum during the coming three years according to the twelve analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 12% per annum, which is noticeably more attractive.

In light of this, it's understandable that Health Catalyst's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Health Catalyst's P/S Mean For Investors?

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.

As expected, our analysis of Health Catalyst's 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Health Catalyst that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.