Investors Give Paysafe Limited (NYSE:PSFE) Shares A 26% Hiding

Paysafe Limited (NYSE:PSFE) shares have had a horrible month, losing 26% after a relatively good period beforehand. Still, a bad month hasn't completely ruined the past year with the stock gaining 63%, which is great even in a bull market.

Following the heavy fall in price, Paysafe may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Diversified Financial industry in the United States have P/S ratios greater than 2.8x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

View our latest analysis for Paysafe

How Has Paysafe Performed Recently?

With revenue growth that's inferior to most other companies of late, Paysafe has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. 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 Paysafe.

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

Paysafe's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Retrospectively, the last year delivered a decent 8.2% gain to the company's revenues. The solid recent performance means it was also able to grow revenue by 14% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 6.7% over the next year. With the industry only predicted to deliver 4.3%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Paysafe is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Paysafe's P/S

Paysafe's P/S looks about as weak as its stock price lately. 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.

A look at Paysafe's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Paysafe with six simple checks on some of these key factors.

If you're unsure about the strength of Paysafe's 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.