Is This Healthcare Stock's Valuation Still Too High?

Growth expectations remain high for Signify Health in 2022

May 31, 2022 at 11:43 AM
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Signify Health, Inc. (NYSE:SGFY) is an American healthcare company that uses analytics, technology, and nationwide healthcare provider networks to create value-based payment programs. Through SGFY's platform, the company offers clinical, social, and behavioral services to address their customer’s healthcare needs and prevent events that drive excess cost, while shifting services to patient’s homes and lessening dependence on facility-centric care.

Signify stock price has decreased about 47% year-over-year and SGFY is currently trading down 58% since peaking at a 52-week high of $31.91 last June. Additionally, shares of SGFY have dropped in price 11% year-to-date and are down 12% just over the past month. However, Signify stock has recovered 25% since bottoming at an all-time low of $10.70 earlier this month.

SGFY’s valuation continues to be relatively high at a forward price-earnings ratio of 34.36 and a price-sales ratio of 2.84. Still, Signify stock's strong fundamentals make it a viable long-term investment. The healthcare company currently holds $451.3 million in cash and $371.3 million in total debt on their balance sheet. SGFY has also produced meaningful and consistent top- and bottom-line growth over multiple years.

On the top-line, Signify Health reported 26.7% revenue growth for fiscal 2021, having increased their annual revenues by a total of 139.7% since fiscal 2018. On the bottom-line, Signify Health has increased their net income by $63 million since fiscal 2019, reaching profitability in fiscal 2021 with $19.7 million in net income. In addition, the healthcare company is estimated to grow revenues 24.5% and earnings 145.5% for fiscal 2022. Signify is also expected to see their revenues increase 19.2% and their earnings increase 100% for fiscal 2023, indicating a very high expected growth rate.

Overall, the Signify stock is one of the safer high-growth, small cap companies available on the market, which helps to justify SGFY’s high valuation for investor’s willing to hold long-term.

 

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