Market Participants Recognise Hims & Hers Health, Inc.'s (NYSE:HIMS) Revenues Pushing Shares 46% Higher

Hims & Hers Health, Inc. (NYSE:HIMS) shares have continued their recent momentum with a 46% gain in the last month alone. This latest share price bounce rounds out a remarkable 355% gain over the last twelve months.

After such a large jump in price, given around half the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1.2x, you may consider Hims & Hers Health as a stock to avoid entirely with its 6.8x 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.

See 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Hims & Hers Health.

Is There Enough Revenue Growth Forecasted For Hims & Hers Health?

In order to justify its P/S ratio, Hims & Hers Health would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an exceptional 57% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 30% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 8.2% 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. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Hims & Hers Health's P/S?

The strong share price surge has lead to Hims & Hers Health's P/S soaring as well. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

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. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Hims & Hers Health that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.