Despite an already strong run, GeneDx Holdings Corp. (NASDAQ:WGS) shares have been powering on, with a gain of 35% in the last thirty days. The last month tops off a massive increase of 293% in the last year.

After such a large jump in price, when almost half of the companies in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1.2x, you may consider GeneDx Holdings as a stock not worth researching with its 3.4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How GeneDx Holdings Has Been Performing

While the industry has experienced revenue growth lately, GeneDx Holdings' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

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.

Do Revenue Forecasts Match The High P/S Ratio?

GeneDx Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 13% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the four analysts following the company. With the industry only predicted to deliver 7.4%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that GeneDx Holdings' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

GeneDx Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 look into GeneDx Holdings shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for GeneDx Holdings (of which 1 is significant!) you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com