Market Cool On agilon health, inc.'s (NYSE:AGL) Revenues Pushing Shares 34% Lower

agilon health, inc. (NYSE:AGL) shares have had a horrible month, losing 34% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 72% share price decline.

Following the heavy fall in price, considering around half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider agilon health as an solid investment opportunity with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for agilon health

What Does agilon health's Recent Performance Look Like?

Recent times have been advantageous for agilon health 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For agilon health?

In order to justify its P/S ratio, agilon health would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 66% gain to the company's top line. The latest three year period has also seen an excellent 242% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 22% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 7.5% per annum, which is noticeably less attractive.

With this information, we find it odd that agilon health is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

agilon health's 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.

agilon health's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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.

It is also worth noting that we have found 1 warning sign for agilon health that you need to take into consideration.

If these risks are making you reconsider your opinion on agilon health, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.