Investors Appear Satisfied With Flywire Corporation's (NASDAQ:FLYW) Prospects
When close to half the companies in the Diversified Financial industry in the United States have price-to-sales ratios (or "P/S") below 2.1x, you may consider Flywire Corporation (NASDAQ:FLYW) as a stock to avoid entirely with its 10.8x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
View our latest analysis for Flywire
What Does Flywire's Recent Performance Look Like?
Recent times have been advantageous for Flywire as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.
Keen to find out how analysts think Flywire's future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The High P/S?
There's an inherent assumption that a company should far outperform the industry for P/S ratios like Flywire's to be considered reasonable.
If we review the last year of revenue growth, the company posted a terrific increase of 44%. Pleasingly, revenue has also lifted 205% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Looking ahead now, revenue is anticipated to climb by 28% per annum during the coming three years according to the analysts following the company. With the industry only predicted to deliver 11% each year, the company is positioned for a stronger revenue result.
In light of this, it's understandable that Flywire's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
The Key Takeaway
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.
As we suspected, our examination of Flywire's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
Having said that, be aware Flywire is showing 2 warning signs in our investment analysis, you should know about.
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.
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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.
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