Winning stocks have been hard to come by lately, but Hims & Hers Health (HIMS 1.87%) has been exactly that. The stock's more than doubled in just three months.
A 100% move is enormous, but the stock comes from such a beaten-down price that the good times might not be over. Here is why Hims & Hers remains a bargain worth considering today.
Is the party just starting?
The stock made a big move in a short amount of time. Shares are up 109% over the past three months. But you can see below that the stock is still a long way from where it once traded, down 70% from its high, despite the recent comeback.
That reflects in the stock's price-to-sales ratio (P/S). It currently sits at just under 4, and briefly reached as high as 12 at one point. But you can't assume that Hims & Hers will keep climbing simply because the stock once traded at a higher price -- stocks don't remember where they used to trade.
Instead, you can look to the company's fundamentals to see whether the business will grow and execute enough to earn a higher price from the market. Fortunately for investors, the company is doing its part to win Wall Street over.
The business is hitting a new level
A euphoric market in 2021 likely inflated Hims & Hers to a lofty valuation that it may never see again. But that's fine; the stock can be an excellent investment moving forward, even if it trades at a P/S of 4 indefinitely.
Hims & Hers just turned in 87% year-over-year revenue growth in the second quarter of 2022, and you can see below that this is part of a longer-term trend where growth is accelerating. The company launched its smartphone apps at the beginning of the year, and that's seemingly played a role in boosting its growth.
HIMS Revenue (Quarterly YoY Growth) data by YCharts.
Management doesn't expect the momentum to stop. It raised full-2022 revenue guidance to between $470 million and $485 million. This is the second time management has raised guidance; it initially set the bar for 2022 at $365 million to $385 million, then raised it to $410 million to $425 million in the first quarter.
Doing the math, revenue guidance has already climbed 33% from the low end of its initial guidance just six months earlier. Hims & Hers hasn't been a public company long, but it's establishing an excellent track record of underpromising and overdelivering.
That's why Hims & Hers could generate strong investment returns, even if it stays at a constant P/S -- the growth could force the share price higher over time.
A massive market with room to grow
The company still has just 817,000 subscriptions against a U.S. population that holds roughly 140 million people among millennials and Generation Z, the age groups that Hims & Hers targets.
There is room for the company to multiply its subscription base over the coming years, which doesn't even factor in potential international markets. Healthcare is a competitive space, and other competitors are already out there. However, Hims & Hers' stellar growth speaks volumes about the company's resilience in the face of competition.
