Potential Upside For Repay Holdings Corporation (NASDAQ:RPAY) Not Without Risk

It's not a stretch to say that Repay Holdings Corporation's (NASDAQ:RPAY) price-to-sales (or "P/S") ratio of 2.3x right now seems quite "middle-of-the-road" for companies in the Diversified Financial industry in the United States, where the median P/S ratio is around 2.4x. 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 Repay Holdings

How Repay Holdings Has Been Performing

With revenue growth that's inferior to most other companies of late, Repay Holdings has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Repay Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Repay Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 9.1% gain to the company's revenues. The latest three year period has also seen an excellent 99% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 6.4% during the coming year according to the ten analysts following the company. That's shaping up to be materially higher than the 1.6% growth forecast for the broader industry.

With this information, we find it interesting that Repay Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

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.

We've established that Repay Holdings currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

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

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.