Investors Appear Satisfied With Hims & Hers Health, Inc.'s (NYSE:HIMS) Prospects As Shares Rocket 49%

The Hims & Hers Health, Inc. (NYSE:HIMS) share price has done very well over the last month, posting an excellent gain of 49%. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.

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 3.3x 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 so lofty.

Check out our latest analysis for Hims & Hers Health

What Does Hims & Hers Health's P/S Mean For Shareholders?

Recent times have been advantageous for Hims & Hers Health as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 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?

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

If we review the last year of revenue growth, the company posted a terrific increase of 65%. 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 eleven 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 7.7% per annum, 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. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Hims & Hers Health's P/S Mean For Investors?

The strong share price surge has lead to Hims & Hers Health's P/S soaring as well. 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.

As we suspected, our examination of Hims & Hers Health's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Hims & Hers Health you should know about.

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.