With Paymentus Holdings, Inc. (NYSE:PAY) It Looks Like You'll Get What You Pay For

Paymentus Holdings, Inc.'s (NYSE:PAY) price-to-sales (or "P/S") ratio of 3.3x may not look like an appealing investment opportunity when you consider close to half the companies in the Diversified Financial industry in the United States have P/S ratios below 2.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Paymentus Holdings

How Paymentus Holdings Has Been Performing

Paymentus Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Paymentus Holdings.

Is There Enough Revenue Growth Forecasted For Paymentus Holdings?

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

Taking a look back first, we see that the company grew revenue by an impressive 23% last year. Pleasingly, revenue has also lifted 93% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 18% per year during the coming three years according to the seven analysts following the company. That's shaping up to be materially higher than the 9.2% each year growth forecast for the broader industry.

With this in mind, it's not hard to understand why Paymentus Holdings' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Paymentus Holdings' P/S?

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 Paymentus Holdings' 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. It's hard to see the share price falling strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Paymentus Holdings with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Paymentus Holdings, 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.