Talkspace, Inc. (NASDAQ:TALK) shareholders have had their patience rewarded with a 25% share price jump in the last month. The annual gain comes to 240% following the latest surge, making investors sit up and take notice.

After such a large jump in price, you could be forgiven for thinking Talkspace is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.3x, considering almost half the companies in the United States' Healthcare industry have P/S ratios below 1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

How Talkspace Has Been Performing

With revenue growth that's superior to most other companies of late, Talkspace has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as Talkspace's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 25% last year. The latest three year period has also seen an excellent 97% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 22% per year as estimated by the two analysts watching the company. With the industry only predicted to deliver 7.7% per year, the company is positioned for a stronger revenue result.

With this information, we can see why Talkspace is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Talkspace's P/S?

Talkspace's P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Talkspace maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Healthcare industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for Talkspace that you need to take into consideration.

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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