To the annoyance of some shareholders, Evolent Health, Inc. (NYSE:EVH) shares are down a considerable 52% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 59% share price decline.

Since its price has dipped substantially, Evolent Health may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Healthcare Services industry in the United States have P/S ratios greater than 2.2x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Evolent Health Has Been Performing

Recent times have been advantageous for Evolent Health as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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 Evolent Health.

Do Revenue Forecasts Match The Low P/S Ratio?

Evolent Health's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 38%. Pleasingly, revenue has also lifted 172% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 16% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 11% per year, which is noticeably less attractive.

In light of this, it's peculiar that Evolent Health's 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.

What Does Evolent Health's P/S Mean For Investors?

Evolent Health's recently weak share price has pulled its P/S back below other Healthcare Services companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Evolent Health'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. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Plus, you should also learn about this 1 warning sign we've spotted with Evolent Health.

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.