HeartFlow (HTFL): Evaluating Valuation After 24% Monthly Share Price Decline

HeartFlow (HTFL) has experienced some movement in its stock, prompting investors to consider the latest trends around the company. Over the past month, shares have declined around 24%, which stands out compared to some peers in the healthcare sector.

See our latest analysis for HeartFlow.

Zooming out, HeartFlow's share price return over the past year has been subdued, with recent losses accelerating momentum to the downside. After a sharp 24% slide this month, the stock is trading at $27.67. This gives investors reason to pay closer attention to underlying growth and risk perception. While the market seems cautious in the short term, it is worth noting that shifts in sentiment can open up long-term opportunities when fundamentals improve.

If today's shifts in healthcare stocks have you thinking about what else is out there, see what stands out in the broader sector with our See the full list for free.

With shares now trading well below recent analyst targets, investors may wonder whether HeartFlow represents an undervalued play on healthcare innovation or if the market is correctly pricing in all future growth prospects.

Price-to-Sales of 14.6x: Is it justified?

HeartFlow currently trades at a price-to-sales ratio of 14.6x, which is substantially higher than both industry and peer averages. This suggests the stock is richly valued relative to its revenue base.

The price-to-sales ratio measures how much investors are willing to pay for each dollar of a company's sales. It is a common benchmark for high-growth or unprofitable businesses like HeartFlow. Since the company is not profitable, this metric can offer a sense of how optimistic the market is about future growth potential.

Despite HeartFlow's robust revenue expansion, its price-to-sales multiple far exceeds the US Healthcare Services industry average of 2.5x, with peers averaging 2.7x. This signals that investors are paying a significant premium compared to similar companies. If a fair ratio were available, it could set a more reasonable benchmark for HeartFlow’s valuation. At present, its current multiple indicates considerable optimism reflected in the price.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Sales of 14.6x (OVERVALUED)

However, slowing revenue growth or persistently negative net income may prompt further caution from investors and could challenge the current optimistic valuation.

Find out about the key risks to this HeartFlow narrative.

Another View: Discounted Cash Flow Perspective

Taking a different approach, our DCF model suggests HeartFlow could be significantly overvalued. With shares trading at $27.67 and our DCF fair value estimate sitting at $4.76, this method presents a much more conservative assessment compared to the market’s current pricing. Could this highlight valuation risk that investors need to consider, or is the market looking past traditional measures for future growth?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out HeartFlow for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 919 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own HeartFlow Narrative

If you view the numbers differently or want to run your own analysis, you can craft a personalized narrative in just a few minutes. Do it your way

A great starting point for your HeartFlow research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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