Forge Global Holdings, Inc.'s (NYSE:FRGE) Shares Leap 27% Yet They're Still Not Telling The Full Story

Those holding Forge Global Holdings, Inc. (NYSE:FRGE) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 70% share price drop in the last twelve months.

Although its price has surged higher, Forge Global Holdings may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.5x, since almost half of all companies in the Capital Markets industry in the United States have P/S ratios greater than 3.5x and even P/S higher than 9x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Forge Global Holdings

What Does Forge Global Holdings' Recent Performance Look Like?

Recent times haven't been great for Forge Global Holdings as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Forge Global Holdings.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Forge Global Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. However, this wasn't enough as the latest three year period has seen the company endure a nasty 32% drop in revenue in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 28% over the next year. That's shaping up to be materially higher than the 10.0% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Forge Global Holdings' P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Forge Global Holdings' P/S

Forge Global Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

Forge Global Holdings' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

You should always think about risks. Case in point, we've spotted 4 warning signs for Forge Global Holdings you should be aware of.

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.