After Leaping 30% Hippo Holdings Inc. (NYSE:HIPO) Shares Are Not Flying Under The Radar

Hippo Holdings Inc. (NYSE:HIPO) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 89% in the last year.

After such a large jump in price, you could be forgiven for thinking Hippo Holdings is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.9x, considering almost half the companies in the United States' Insurance industry have P/S ratios below 1.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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What Does Hippo Holdings' Recent Performance Look Like?

Recent times have been advantageous for Hippo Holdings 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.

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Is There Enough Revenue Growth Forecasted For Hippo Holdings?

Hippo Holdings' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 56% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 17% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 7.3% per annum, which is noticeably less attractive.

With this information, we can see why Hippo Holdings is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Hippo Holdings' P/S?

Hippo Holdings shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Hippo Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Insurance industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Hippo Holdings with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Hippo Holdings, 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.