Investors Continue Waiting On Sidelines For Fidelity National Financial, Inc. (NYSE:FNF)
There wouldn't be many who think Fidelity National Financial, Inc.'s (NYSE:FNF) price-to-sales (or "P/S") ratio of 1.2x is worth a mention when the median P/S for the Insurance industry in the United States is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
View our latest analysis for Fidelity National Financial
What Does Fidelity National Financial's P/S Mean For Shareholders?
While the industry has experienced revenue growth lately, Fidelity National Financial's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on analyst estimates for the company? Then our free report on Fidelity National Financial will help you uncover what's on the horizon.
What Are Revenue Growth Metrics Telling Us About The P/S?
Fidelity National Financial's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered a frustrating 21% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 16% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.
Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 8.4% over the next year. With the industry only predicted to deliver 6.4%, the company is positioned for a stronger revenue result.
With this information, we find it interesting that Fidelity National Financial is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Final Word
Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
We've established that Fidelity National Financial currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
Having said that, be aware Fidelity National Financial is showing 2 warning signs in our investment analysis, you should know about.
If you're unsure about the strength of Fidelity National Financial's 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.
