SelectQuote, Inc. (NYSE:SLQT) Doing What It Can To Lift Shares

When you see that almost half of the companies in the Insurance industry in the United States have price-to-sales ratios (or "P/S") above 1x, SelectQuote, Inc. (NYSE:SLQT) looks to be giving off some buy signals with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for SelectQuote

What Does SelectQuote's P/S Mean For Shareholders?

SelectQuote certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If you 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.

Keen to find out how analysts think SelectQuote's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For SelectQuote?

SelectQuote's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 34% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 39% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% during the coming year according to the two analysts following the company. With the industry only predicted to deliver 6.4%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that SelectQuote's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does SelectQuote's P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A look at SelectQuote'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. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Plus, you should also learn about these 2 warning signs we've spotted with SelectQuote (including 1 which is a bit concerning).

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.

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