LifeMD, Inc.'s (NASDAQ:LFMD) Shares Leap 31% Yet They're Still Not Telling The Full Story

LifeMD, Inc. (NASDAQ:LFMD) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

In spite of the firm bounce in price, LifeMD's price-to-sales (or "P/S") ratio of 1.3x might still make it look like a buy right now compared to the Healthcare Services industry in the United States, where around half of the companies have P/S ratios above 2.3x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for LifeMD

How LifeMD Has Been Performing

LifeMD certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, LifeMD would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 42% last year. The strong recent performance means it was also able to grow revenue by 146% 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.

Turning to the outlook, the next year should generate growth of 26% as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 8.9%, which is noticeably less attractive.

With this information, we find it odd that LifeMD is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

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

Despite LifeMD's share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

LifeMD's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

We don't want to rain on the parade too much, but we did also find 4 warning signs for LifeMD (1 is potentially serious!) 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.