Potential Upside For FTAI Infrastructure Inc. (NASDAQ:FIP) Not Without Risk
With a median price-to-sales (or "P/S") ratio of close to 0.8x in the Transportation industry in the United States, you could be forgiven for feeling indifferent about FTAI Infrastructure Inc.'s (NASDAQ:FIP) P/S ratio of 1.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
See our latest analysis for FTAI Infrastructure
How FTAI Infrastructure Has Been Performing
With revenue growth that's superior to most other companies of late, FTAI Infrastructure has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Want the full picture on analyst estimates for the company? Then our free report on FTAI Infrastructure will help you uncover what's on the horizon.
How Is FTAI Infrastructure's Revenue Growth Trending?
There's an inherent assumption that a company should be matching the industry for P/S ratios like FTAI Infrastructure's to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 30% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. 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 57% during the coming year according to the sole analyst 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 curious that FTAI Infrastructure's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.
The Final Word
We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that FTAI Infrastructure 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.
Having said that, be aware FTAI Infrastructure is showing 3 warning signs in our investment analysis, and 2 of those are potentially serious.
If you're unsure about the strength of FTAI Infrastructure'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.
