Talkspace, Inc. (NASDAQ:TALK) Looks Just Right With A 29% Price Jump

Despite an already strong run, Talkspace, Inc. (NASDAQ:TALK) shares have been powering on, with a gain of 29% in the last thirty days. The last month tops off a massive increase of 214% in the last year.

Following the firm bounce in price, given around half the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Talkspace as a stock to avoid entirely with its 3.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Talkspace

What Does Talkspace's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Talkspace has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might 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 Talkspace.

Is There Enough Revenue Growth Forecasted For Talkspace?

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

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The strong recent performance means it was also able to grow revenue by 97% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 22% each year during the coming three years according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.7% per annum, which is noticeably less attractive.

In light of this, it's understandable that Talkspace's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Talkspace's P/S Mean For Investors?

Shares in Talkspace have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

As we suspected, our examination of Talkspace'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. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Talkspace that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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

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.