What You Can Learn From Hims & Hers Health, Inc.'s (NYSE:HIMS) P/S After Its 26% Share Price Crash

Hims & Hers Health, Inc. (NYSE:HIMS) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 134% in the last twelve months.

Although its price has dipped substantially, when almost half of the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1x, you may still consider Hims & Hers Health as a stock not worth researching with its 6x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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Check out 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. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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?

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 86%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 25% each year as estimated by the analysts watching the company. That's shaping up to be materially higher than the 7.1% per year growth forecast for the broader industry.

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

Hims & Hers Health's shares may have suffered, but its P/S remains high. 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.

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. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 1 warning sign for Hims & Hers Health that you should be aware of.

If you're unsure about the strength of Hims & Hers Health's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.