After Leaping 53% GeneDx Holdings Corp. (NASDAQ:WGS) Shares Are Not Flying Under The Radar

The GeneDx Holdings Corp. (NASDAQ:WGS) share price has done very well over the last month, posting an excellent gain of 53%. This latest share price bounce rounds out a remarkable 1,324% gain over the last twelve months.

Since its price has surged higher, you could be forgiven for thinking GeneDx Holdings is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.2x, considering almost half the companies in the United States' Healthcare industry have P/S ratios below 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for GeneDx Holdings

How Has GeneDx Holdings Performed Recently?

Recent times haven't been great for GeneDx Holdings as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 3.1% last year. The latest three year period has also seen a 14% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 16% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.7%, which is noticeably less attractive.

In light of this, it's understandable that GeneDx Holdings' 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.

The Final Word

Shares in GeneDx Holdings have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that GeneDx Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Healthcare industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You need to take note of risks, for example - GeneDx Holdings has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you're unsure about the strength of GeneDx Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.