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Cautious Investors Not Rewarding i3 Verticals, Inc.'s (NASDAQ:IIIV) Performance Completely

When you see that almost half of the companies in the Diversified Financial industry in the United States have price-to-sales ratios (or "P/S") above 2.4x, i3 Verticals, Inc. (NASDAQ:IIIV) looks to be giving off some buy signals with its 1.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for i3 Verticals

ps-multiple-vs-industry
ps-multiple-vs-industry

What Does i3 Verticals' Recent Performance Look Like?

Recent times have been advantageous for i3 Verticals as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think i3 Verticals' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For i3 Verticals?

There's an inherent assumption that a company should underperform the industry for P/S ratios like i3 Verticals' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. The latest three year period has also seen a 21% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the six analysts following the company. With the industry only predicted to deliver 8.2%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that i3 Verticals' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On i3 Verticals' P/S

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

i3 Verticals' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

You should always think about risks. Case in point, we've spotted 1 warning sign for i3 Verticals you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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