Teladoc Health, Inc.'s (NYSE:TDOC) Revenues Are Not Doing Enough For Some Investors

With a price-to-sales (or "P/S") ratio of 1.6x Teladoc Health, Inc. (NYSE:TDOC) may be sending bullish signals at the moment, given that almost half of all the Healthcare Services companies in the United States have P/S ratios greater than 2.3x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Teladoc Health

What Does Teladoc Health's Recent Performance Look Like?

Recent revenue growth for Teladoc Health has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

How Is Teladoc Health's Revenue Growth Trending?

Teladoc Health's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 15% gain to the company's top line. 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 8.3% per year as estimated by the analysts watching the company. With the industry predicted to deliver 18% growth per year, the company is positioned for a weaker revenue result.

With this information, we can see why Teladoc Health is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Teladoc Health's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Teladoc Health maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Plus, you should also learn about this 1 warning sign we've spotted with Teladoc Health.

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.