Nasdaq
华尔街日报Further Upside For eHealth, Inc. (NASDAQ:EHTH) Shares Could Introduce Price Risks After 35% Bounce
eHealth, Inc. (NASDAQ:EHTH) shareholders would be excited to see that the share price has had a great month, posting a 35% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 39% in the last twelve months.
In spite of the firm bounce in price, when close to half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider eHealth as an enticing stock to check out with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for eHealth
How Has eHealth Performed Recently?
Recent times have been advantageous for eHealth as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on eHealth.How Is eHealth's Revenue Growth Trending?
In order to justify its P/S ratio, eHealth would need to produce sluggish growth that's trailing the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 17%. As a result, it also grew revenue by 20% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.
Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 3.8% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 4.6% per year, which is not materially different.
With this in consideration, we find it intriguing that eHealth's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.
What We Can Learn From eHealth's P/S?
Despite eHealth's share price climbing recently, its P/S still lags most other companies. 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.
Our examination of eHealth's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.
It is also worth noting that we have found 1 warning sign for eHealth that you need to take into consideration.
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.