It's A Story Of Risk Vs Reward With Privia Health Group, Inc. (NASDAQ:PRVA)

There wouldn't be many who think Privia Health Group, Inc.'s (NASDAQ:PRVA) price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S for the Healthcare industry in the United States 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.

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View our latest analysis for Privia Health Group

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

Privia Health Group could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For Privia Health Group?

In order to justify its P/S ratio, Privia Health Group would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 6.8%. This was backed up an excellent period prior to see revenue up by 69% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 11% per year during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 7.1% per year growth forecast for the broader industry.

With this information, we find it interesting that Privia Health Group is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Privia Health Group's P/S?

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.

We've established that Privia Health Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

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.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.