PB Fintech Limited's (NSE:POLICYBZR) P/S Is On The Mark

When close to half the companies in the Insurance industry in India have price-to-sales ratios (or "P/S") below 1.3x, you may consider PB Fintech Limited (NSE:POLICYBZR) as a stock to avoid entirely with its 18.1x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for PB Fintech

What Does PB Fintech's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, PB Fintech has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as PB Fintech's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 41% last year. The strong recent performance means it was also able to grow revenue by 260% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 27% per year over the next three years. That's shaping up to be materially higher than the 9.6% per year growth forecast for the broader industry.

In light of this, it's understandable that PB Fintech'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.

What Does PB Fintech's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into PB Fintech shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware PB Fintech is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on PB Fintech, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.