Alight, Inc.'s (NYSE:ALIT) P/S Is On The Mark

There wouldn't be many who think Alight, Inc.'s (NYSE:ALIT) price-to-sales (or "P/S") ratio of 1.2x is worth a mention when the median P/S for the Professional Services industry in the United States is similar at about 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Alight

How Has Alight Performed Recently?

Recent times have been advantageous for Alight as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 Alight will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Alight would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Revenue has also lifted 24% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 4.9% during the coming year according to the nine analysts following the company. With the industry predicted to deliver 5.6% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Alight's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Alight's P/S

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.

Our look at Alight's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Alight, and understanding should be part of your investment process.

If you're unsure about the strength of Alight'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com