GeneDx Holdings Corp.'s (NASDAQ:WGS) P/S Is Still On The Mark Following 40% Share Price Bounce

Despite an already strong run, GeneDx Holdings Corp. (NASDAQ:WGS) shares have been powering on, with a gain of 40% in the last thirty days. This latest share price bounce rounds out a remarkable 4,789% gain over the last twelve months.

Since its price has surged higher, when almost half of the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1x, you may consider GeneDx Holdings as a stock not worth researching with its 8.1x 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 GeneDx Holdings

What Does GeneDx Holdings' P/S Mean For Shareholders?

Recent times have been advantageous for GeneDx Holdings as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think GeneDx Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For GeneDx Holdings?

GeneDx Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. The latest three year period has also seen a 22% overall rise in revenue, aided extensively 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 21% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.5%, 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 Bottom Line On GeneDx Holdings' P/S

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

As we suspected, our examination of GeneDx Holdings' 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with GeneDx Holdings (at least 1 which is significant), and understanding them should be part of your investment process.

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.