Investors Appear Satisfied With Forge Global Holdings, Inc.'s (NYSE:FRGE) Prospects As Shares Rocket 29%

Despite an already strong run, Forge Global Holdings, Inc. (NYSE:FRGE) shares have been powering on, with a gain of 29% in the last thirty days. The annual gain comes to 168% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, you could be forgiven for thinking Forge Global Holdings is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 10.3x, considering almost half the companies in the United States' Capital Markets industry have P/S ratios below 3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Forge Global Holdings

What Does Forge Global Holdings' Recent Performance Look Like?

Forge Global Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Forge Global Holdings' Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 18%. Still, the latest three year period has seen an excellent 31% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 35% as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 8.8% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Forge Global Holdings' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Forge Global Holdings' P/S?

Shares in Forge Global Holdings have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Forge Global Holdings 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. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Forge Global Holdings is showing 2 warning signs in our investment analysis, you should know about.

If you're unsure about the strength of Forge Global Holdings' 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.