Investors Still Waiting For A Pull Back In Blue Owl Capital Inc. (NYSE:OWL)

Blue Owl Capital Inc.'s (NYSE:OWL) price-to-sales (or "P/S") ratio of 5x may not look like an appealing investment opportunity when you consider close to half the companies in the Capital Markets industry in the United States have P/S ratios below 3.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Blue Owl Capital

What Does Blue Owl Capital's P/S Mean For Shareholders?

Recent times haven't been great for Blue Owl Capital as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Blue Owl Capital.

How Is Blue Owl Capital's Revenue Growth Trending?

In order to justify its P/S ratio, Blue Owl Capital would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 23% as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 7.5% growth forecast for the broader industry.

In light of this, it's understandable that Blue Owl Capital'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.

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Blue Owl Capital 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.

Before you take the next step, you should know about the 2 warning signs for Blue Owl Capital (1 shouldn't be ignored!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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