Some Shareholders Feeling Restless Over Agiliti, Inc.'s (NYSE:AGTI) P/S Ratio

When you see that almost half of the companies in the Healthcare industry in the United States have price-to-sales ratios (or "P/S") below 1x, Agiliti, Inc. (NYSE:AGTI) looks to be giving off some sell signals with its 2x 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 as high as it is.

Check out our latest analysis for Agiliti

What Does Agiliti's P/S Mean For Shareholders?

Recent times haven't been great for Agiliti 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.

Keen to find out how analysts think Agiliti's 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 Agiliti?

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

If we review the last year of revenue growth, the company posted a worthy increase of 2.6%. This was backed up an excellent period prior to see revenue up by 76% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 6.1% over the next year. Meanwhile, the rest of the industry is forecast to expand by 7.6%, which is not materially different.

With this information, we find it interesting that Agiliti is trading at a high P/S compared to the industry. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Agiliti's P/S?

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.

Analysts are forecasting Agiliti's revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. A positive change is needed in order to justify the current price-to-sales ratio.

You need to take note of risks, for example - Agiliti has 4 warning signs (and 1 which can't be ignored) we think you should know about.

If you're unsure about the strength of Agiliti's 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.