Aveanna Healthcare Holdings Inc. (NASDAQ:AVAH) shareholders have had their patience rewarded with a 33% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 95% in the last year.

Although its price has surged higher, considering around half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Aveanna Healthcare Holdings as an solid investment opportunity with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Aveanna Healthcare Holdings' Recent Performance Look Like?

Recent times haven't been great for Aveanna Healthcare Holdings as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Aveanna Healthcare Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Aveanna Healthcare Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 6.4%. The latest three year period has also seen a 23% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 4.3% over the next year. Meanwhile, the rest of the industry is forecast to expand by 7.6%, which is noticeably more attractive.

With this information, we can see why Aveanna Healthcare Holdings is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Aveanna Healthcare Holdings' P/S?

The latest share price surge wasn't enough to lift Aveanna Healthcare Holdings' P/S close to the industry median. 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.

We've established that Aveanna Healthcare Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Having said that, be aware Aveanna Healthcare Holdings is showing 3 warning signs in our investment analysis, and 2 of those are potentially serious.

If you're unsure about the strength of Aveanna Healthcare Holdings' 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.