After Leaping 32% Privia Health Group, Inc. (NASDAQ:PRVA) Shares Are Not Flying Under The Radar

Privia Health Group, Inc. (NASDAQ:PRVA) shareholders would be excited to see that the share price has had a great month, posting a 32% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 3.0% isn't as impressive.

After such a large jump in price, you could be forgiven for thinking Privia Health Group is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.6x, considering almost half the companies in the United States' Healthcare industry have P/S ratios below 1.1x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Privia Health Group

What Does Privia Health Group's Recent Performance Look Like?

Recent times have been advantageous for Privia Health Group as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Privia Health Group?

The only time you'd be truly comfortable seeing a P/S as high as Privia Health Group's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. The latest three year period has also seen an excellent 97% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 10% each year over the next three years. That's shaping up to be materially higher than the 7.2% per year growth forecast for the broader industry.

With this in mind, it's not hard to understand why Privia Health Group's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Privia Health Group's P/S Mean For Investors?

The large bounce in Privia Health Group's shares has lifted the company's P/S handsomely. 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.

As we suspected, our examination of Privia Health Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Privia Health Group that you should be aware 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.