Heritage Insurance Holdings, Inc.'s (NYSE:HRTG) Subdued P/S Might Signal An Opportunity

When close to half the companies operating in the Insurance industry in the United States have price-to-sales ratios (or "P/S") above 1.1x, you may consider Heritage Insurance Holdings, Inc. (NYSE:HRTG) as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Heritage Insurance Holdings

What Does Heritage Insurance Holdings' P/S Mean For Shareholders?

Heritage Insurance Holdings could be doing better as it's been growing revenue less than most other companies lately. 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 Heritage Insurance Holdings.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. The latest three year period has also seen a 23% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 7.7% over the next year. That's shaping up to be similar to the 6.5% growth forecast for the broader industry.

With this information, we find it odd that Heritage Insurance Holdings is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Heritage Insurance Holdings' P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Heritage Insurance Holdings remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

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

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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