Many Still Looking Away From Evolent Health, Inc. (NYSE:EVH)

With a median price-to-sales (or "P/S") ratio of close to 2x in the Healthcare Services industry in the United States, you could be forgiven for feeling indifferent about Evolent Health, Inc.'s (NYSE:EVH) P/S ratio, which comes in at about the same. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Evolent Health

What Does Evolent Health's Recent Performance Look Like?

Evolent Health certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Evolent Health's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 47% last year. Pleasingly, revenue has also lifted 96% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 18% per annum over the next three years. That's shaping up to be materially higher than the 13% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that Evolent Health's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Evolent Health's P/S?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Looking at Evolent Health's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You should always think about risks. Case in point, we've spotted 2 warning signs for Evolent Health you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.