Yahoo Finance agilon health, inc.'s (NYSE:AGL) Share Price Matching Investor Opinion
When you see that almost half of the companies in the Healthcare industry in the United States have price-to-sales ratios (or "P/S") below 1.2x, agilon health, inc. (NYSE:AGL) looks to be giving off strong sell signals with its 4.4x 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.
See our latest analysis for agilon health
How agilon health Has Been Performing
agilon health certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. 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 agilon health.
Is There Enough Revenue Growth Forecasted For agilon health?
There's an inherent assumption that a company should far outperform the industry for P/S ratios like agilon health's to be considered reasonable.
Retrospectively, the last year delivered an exceptional 48% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 241% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 40% per year over the next three years. With the industry only predicted to deliver 8.7% per year, the company is positioned for a stronger revenue result.
With this in mind, it's not hard to understand why agilon 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.
The Key Takeaway
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our look into agilon health shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.
And what about other risks? Every company has them, and we've spotted 2 warning signs for agilon health you should know about.
If these risks are making you reconsider your opinion on agilon health, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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