After Leaping 89% Hims & Hers Health, Inc. (NYSE:HIMS) Shares Are Not Flying Under The Radar

Hims & Hers Health, Inc. (NYSE:HIMS) shares have had a really impressive month, gaining 89% after a shaky period beforehand. This latest share price bounce rounds out a remarkable 331% gain over the last twelve months.

Following the firm bounce in price, when almost half of the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Hims & Hers Health as a stock not worth researching with its 6.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Hims & Hers Health

What Does Hims & Hers Health's Recent Performance Look Like?

Recent times have been advantageous for Hims & Hers Health as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Hims & Hers Health's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Hims & Hers Health's Revenue Growth Trending?

Hims & Hers Health's 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 an exceptional 86% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 27% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.9% each year, which is noticeably less attractive.

In light of this, it's understandable that Hims & Hers Health's 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

Shares in Hims & Hers Health have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 Hims & Hers Health 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. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Hims & Hers Health (1 is potentially serious!) that you should be aware of before investing here.

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.