Not Many Are Piling Into The Oncology Institute, Inc. (NASDAQ:TOI) Stock Yet As It Plummets 28%

The Oncology Institute, Inc. (NASDAQ:TOI) shares have had a horrible month, losing 28% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 71%, which is great even in a bull market.

Since its price has dipped substantially, Oncology Institute may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.3x, considering almost half of all companies in the Healthcare industry in the United States have P/S ratios greater than 1x and even P/S higher than 3x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Oncology Institute

What Does Oncology Institute's P/S Mean For Shareholders?

Recent times have been advantageous for Oncology Institute as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Oncology Institute's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 33% last year. The strong recent performance means it was also able to grow revenue by 65% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 18% over the next year. That's shaping up to be materially higher than the 8.0% growth forecast for the broader industry.

In light of this, it's peculiar that Oncology Institute's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Oncology Institute's P/S?

The southerly movements of Oncology Institute's shares means its P/S is now sitting at a pretty low level. 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.

A look at Oncology Institute's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Oncology Institute (1 doesn't sit too well with us!) that you should be aware of before investing here.

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).

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.