InnovAge Holding Corp. (NASDAQ:INNV) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 30% over that time.

Even after such a large jump in price, there still wouldn't be many who think InnovAge Holding's price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in the United States' Healthcare industry is similar at about 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How InnovAge Holding Has Been Performing

With revenue growth that's inferior to most other companies of late, InnovAge Holding has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on InnovAge Holding.

What Are Revenue Growth Metrics Telling Us About The P/S?

InnovAge Holding's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.4% last year. The solid recent performance means it was also able to grow revenue by 20% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 11% over the next year. That's shaping up to be materially higher than the 7.4% growth forecast for the broader industry.

With this in consideration, we find it intriguing that InnovAge Holding's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On InnovAge Holding's P/S

InnovAge Holding appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Looking at InnovAge Holding's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed 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 1 warning sign for InnovAge Holding you should know about.

If you're unsure about the strength of InnovAge Holding's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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