LifeMD, Inc. (NASDAQ:LFMD) Soars 37% But It's A Story Of Risk Vs Reward

Despite an already strong run, LifeMD, Inc. (NASDAQ:LFMD) shares have been powering on, with a gain of 37% in the last thirty days. The last month tops off a massive increase of 112% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about LifeMD's P/S ratio of 2.9x, since the median price-to-sales (or "P/S") ratio for the Healthcare Services industry in the United States is also close to 2.7x. 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.

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See our latest analysis for LifeMD

What Does LifeMD's Recent Performance Look Like?

LifeMD certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think LifeMD's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For LifeMD?

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

Retrospectively, the last year delivered an exceptional 43% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 126% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 21% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 10.0%, which is noticeably less attractive.

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

What We Can Learn From LifeMD's P/S?

LifeMD's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Looking at LifeMD's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for LifeMD (1 shouldn't be ignored!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.