James River Group Holdings, Ltd. (NASDAQ:JRVR) Stock Rockets 26% But Many Are Still Ignoring The Company

James River Group Holdings, Ltd. (NASDAQ:JRVR) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

In spite of the firm bounce in price, when close to half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 1.1x, you may still consider James River Group Holdings as an enticing stock to check out with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

We've discovered 1 warning sign about James River Group Holdings. View them for free.

Check out our latest analysis for James River Group Holdings

What Does James River Group Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, James River Group Holdings' revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on James River Group Holdings will help you uncover what's on the horizon.

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

The only time you'd be truly comfortable seeing a P/S as low as James River Group Holdings' is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. As a result, revenue from three years ago have also fallen 14% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 5.9% over the next year. That's shaping up to be similar to the 5.5% growth forecast for the broader industry.

In light of this, it's peculiar that James River Group Holdings' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does James River Group Holdings' P/S Mean For Investors?

The latest share price surge wasn't enough to lift James River Group Holdings' P/S close to the industry median. 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.

It looks to us like the P/S figures for James River Group Holdings remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Before you settle on your opinion, we've discovered 1 warning sign for James River Group Holdings that you should be aware of.

If you're unsure about the strength of James River Group Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.