Market Participants Recognise GeneDx Holdings Corp.'s (NASDAQ:WGS) Revenues Pushing Shares 28% Higher

Despite an already strong run, GeneDx Holdings Corp. (NASDAQ:WGS) shares have been powering on, with a gain of 28% in the last thirty days. The last 30 days were the cherry on top of the stock's 370% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, 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 4x, considering almost half the companies in the United States' Healthcare industry have P/S ratios below 1.2x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for GeneDx Holdings

How Has GeneDx Holdings Performed Recently?

GeneDx Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

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.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period was better as it's delivered a decent 13% overall rise in revenue. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 13% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 8.0%, 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 Key Takeaway

The strong share price surge has lead to GeneDx Holdings' P/S soaring as well. 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. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for GeneDx Holdings (1 is a bit concerning!) that you need to take into consideration.

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.

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