InnovAge Holding Corp.'s (NASDAQ:INNV) Shares Leap 30% Yet They're Still Not Telling The Full Story

InnovAge Holding Corp. (NASDAQ:INNV) shares have had a really impressive month, gaining 30% 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 30% 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 1x is worth a mention when the median P/S in the United States' Healthcare industry is similar at about 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for InnovAge Holding

How Has InnovAge Holding Performed Recently?

InnovAge Holding could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on InnovAge Holding.

Is There Some Revenue Growth Forecasted For InnovAge Holding?

There's an inherent assumption that a company should be matching the industry for P/S ratios like InnovAge Holding's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 8.4%. The latest three year period has also seen a 20% 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 11% during the coming year according to the four analysts following the company. With the industry only predicted to deliver 7.4%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that InnovAge Holding's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

InnovAge Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, InnovAge Holding's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for InnovAge Holding that you need to take into consideration.

If these risks are making you reconsider your opinion on InnovAge Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

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