Investors Appear Satisfied With Healwell AI Inc.'s (TSE:AIDX) Prospects As Shares Rocket 34%

Healwell AI Inc. (TSE:AIDX) shareholders are no doubt pleased to see that the share price has bounced 34% in the last month, although it is still struggling to make up recently lost ground. The last 30 days bring the annual gain to a very sharp 66%.

Following the firm bounce in price, when almost half of the companies in Canada's Healthcare industry have price-to-sales ratios (or "P/S") below 1.2x, you may consider Healwell AI as a stock not worth researching with its 10.1x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Healwell AI

What Does Healwell AI's P/S Mean For Shareholders?

Recent times have been advantageous for Healwell AI as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Healwell AI's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Healwell AI's Revenue Growth Trending?

In order to justify its P/S ratio, Healwell AI would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 43% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 143% as estimated by the eight analysts watching the company. With the industry only predicted to deliver 16%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Healwell AI's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Healwell AI's P/S Mean For Investors?

Healwell AI's 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.

As we suspected, our examination of Healwell AI's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Healwell AI you should be aware of, and 1 of them is a bit concerning.

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.