Market Participants Recognise Ryan Specialty Holdings, Inc.'s (NYSE:RYAN) Revenues

Ryan Specialty Holdings, Inc.'s (NYSE:RYAN) price-to-sales (or "P/S") ratio of 2.6x may not look like an appealing investment opportunity when you consider close to half the companies in the Insurance industry in the United States have P/S ratios below 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 Ryan Specialty Holdings

How Has Ryan Specialty Holdings Performed Recently?

There hasn't been much to differentiate Ryan Specialty Holdings' and the industry's revenue growth lately. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The latest three year period has also seen an excellent 90% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 22% during the coming year according to the ten analysts following the company. That's shaping up to be materially higher than the 6.3% growth forecast for the broader industry.

In light of this, it's understandable that Ryan Specialty Holdings' 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 Key Takeaway

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.

We've established that Ryan Specialty Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Insurance industry, as expected. 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 Ryan Specialty Holdings that we have uncovered.

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.