Unfortunately for some shareholders, the GeneDx Holdings Corp. (NASDAQ:WGS) share price has dived 49% in the last thirty days, prolonging recent pain.    For any long-term shareholders, the last month ends a year to forget by locking in a 95% share price decline.  

After such a large drop in price, GeneDx Holdings' price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Healthcare industry in the United States, where around half of the companies have P/S ratios above 1x and even P/S above 3x are quite common.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.  

Check out our latest analysis for GeneDx Holdings

NasdaqGS:WGS Price to Sales Ratio vs Industry November 1st 2023

What Does GeneDx Holdings' Recent Performance Look Like?

GeneDx Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average.   The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better.  So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.    

Want the full picture on analyst estimates for the company? Then our free report on GeneDx Holdings will help you uncover what's on the horizon.  

How Is GeneDx Holdings' Revenue Growth Trending?  

GeneDx Holdings' 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 a frustrating 11% decrease to the company's top line.   That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 15% in total.  Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.  

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 13% each year over the next three years.  That's shaping up to be materially higher than the 7.8% each year growth forecast for the broader industry.

In light of this, it's peculiar that GeneDx Holdings' P/S sits below the majority of other companies.  It looks like most investors are not convinced at all that the company can achieve future growth expectations.  

The Key Takeaway

The southerly movements of GeneDx Holdings' shares means its P/S is now sitting at a pretty low level.      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.

A look at GeneDx Holdings' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.    

Plus, you should also learn about these 5 warning signs we've spotted with GeneDx Holdings (including 2 which are concerning).  

If these risks are making you reconsider your opinion on GeneDx 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.