Hims & Hers Health, Inc. (NYSE:HIMS) Stocks Pounded By 27% But Not Lagging Industry On Growth Or Pricing

Hims & Hers Health, Inc. (NYSE:HIMS) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Longer-term shareholders would now have taken a real hit with the stock declining 6.5% in the last year.

Although its price has dipped substantially, given close to half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1.2x, you may still consider Hims & Hers Health as a stock to potentially avoid with its 2.8x 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.

See our latest analysis for Hims & Hers Health

How Has Hims & Hers Health Performed Recently?

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. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Hims & Hers Health's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 65% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 28% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.5% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Hims & Hers Health's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

There's still some elevation in Hims & Hers Health's P/S, even if the same can't be said for its share price recently. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into Hims & Hers Health shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Hims & Hers Health that you should be aware of.

If these risks are making you reconsider your opinion on Hims & Hers 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.