Market Participants Recognise The Carlyle Group Inc.'s (NASDAQ:CG) Revenues

When you see that almost half of the companies in the Capital Markets industry in the United States have price-to-sales ratios (or "P/S") below 3.2x, The Carlyle Group Inc. (NASDAQ:CG) looks to be giving off strong sell signals with its 5.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Carlyle Group

What Does Carlyle Group's P/S Mean For Shareholders?

Recent times haven't been great for Carlyle Group as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Carlyle Group will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Carlyle Group?

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

Retrospectively, the last year delivered a decent 3.3% gain to the company's revenues. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 63% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 50% over the next year. That's shaping up to be materially higher than the 6.8% growth forecast for the broader industry.

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

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Carlyle Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Carlyle Group that you need to take into consideration.

If these risks are making you reconsider your opinion on Carlyle Group, 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.