Getting In Cheap On FTAI Aviation Ltd. (NASDAQ:FTAI) Might Be Difficult

FTAI Aviation Ltd.'s (NASDAQ:FTAI) price-to-sales (or "P/S") ratio of 3.2x may look like a poor investment opportunity when you consider close to half the companies in the Trade Distributors industry in the United States have P/S ratios below 0.9x. 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 FTAI Aviation

How FTAI Aviation Has Been Performing

FTAI Aviation certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. 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 FTAI Aviation will help you uncover what's on the horizon.

How Is FTAI Aviation's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like FTAI Aviation's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 160% gain to the company's top line. Pleasingly, revenue has also lifted 58% 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.

Turning to the outlook, the next year should generate growth of 32% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 5.1%, which is noticeably less attractive.

In light of this, it's understandable that FTAI Aviation'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 FTAI Aviation's P/S Mean For Investors?

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.

Our look into FTAI Aviation shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 2 warning signs for FTAI Aviation that we have uncovered.

If you're unsure about the strength of FTAI Aviation'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.