After Leaping 36% InnovAge Holding Corp. (NASDAQ:INNV) Shares Are Not Flying Under The Radar

InnovAge Holding Corp. (NASDAQ:INNV) shares have had a really impressive month, gaining 36% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

Although its price has surged higher, there still wouldn't be many who think InnovAge Holding's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in the United States' Healthcare industry is similar at about 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We check all companies for important risks. See what we found for InnovAge Holding in our free report.

See our latest analysis for InnovAge Holding

What Does InnovAge Holding's P/S Mean For Shareholders?

Recent revenue growth for InnovAge Holding has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If you like the company, you'd be hoping this can at least be maintained so that you could pick up some stock while it's not quite in favour.

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

How Is InnovAge Holding's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like InnovAge Holding's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 12% gain to the company's revenues. Revenue has also lifted 19% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 10% over the next year. That's shaping up to be similar to the 9.2% growth forecast for the broader industry.

With this in mind, it makes sense that InnovAge Holding's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From InnovAge Holding's P/S?

Its shares have lifted substantially and now InnovAge Holding's P/S is back within range of the industry median. 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.

Our look at InnovAge Holding's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

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 InnovAge Holding with six simple checks.

If you're unsure about the strength of InnovAge Holding's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.