Not Many Are Piling Into GeneDx Holdings Corp. (NASDAQ:WGS) Stock Yet As It Plummets 49%

To the annoyance of some shareholders, GeneDx Holdings Corp. (NASDAQ:WGS) shares are down a considerable 49% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 95% share price decline.

Since its price has dipped substantially, GeneDx Holdings' price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Healthcare industry in the United States, where around half of the companies have P/S ratios above 1x and even P/S above 3x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out 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. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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 Low P/S Ratio?

GeneDx Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 15% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 7.8% per year growth forecast for the broader industry.

With this information, we find it odd that GeneDx Holdings is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On GeneDx Holdings' P/S

GeneDx Holdings' P/S has taken a dip along with its share price. 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.

To us, it seems GeneDx Holdings currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

There are also other vital risk factors to consider and we've discovered 5 warning signs for GeneDx Holdings (2 are significant!) that you should be aware of before investing here.

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.