Unfortunately for some shareholders, the The Oncology Institute, Inc. (NASDAQ:TOI) share price has dived 29% in the last thirty days, prolonging recent pain. The good news is that in the last year, the stock has shone bright like a diamond, gaining 114%.
After such a large drop in price, considering around half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1.2x, you may consider Oncology Institute as an solid investment opportunity with its 0.2x 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 limited.
NasdaqCM:TOI Price to Sales Ratio vs Industry May 5th 2024
What Does Oncology Institute's P/S Mean For Shareholders?
With revenue growth that's superior to most other companies of late, Oncology Institute has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on Oncology Institute will help you uncover what's on the horizon.
How Is Oncology Institute's Revenue Growth Trending?
In order to justify its P/S ratio, Oncology Institute would need to produce sluggish growth that's trailing the industry.
Taking a look back first, we see that the company grew revenue by an impressive 28% last year. The strong recent performance means it was also able to grow revenue by 73% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Turning to the outlook, the next year should generate growth of 27% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.4%, which is noticeably less attractive.
With this information, we find it odd that Oncology Institute is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.
The Final Word
The southerly movements of Oncology Institute's 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.
Oncology Institute's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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.
And what about other risks? Every company has them, and we've spotted 3 warning signs for Oncology Institute you should know about.
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.