SelectQuote, Inc. (NYSE:SLQT) Stock Rockets 30% But Many Are Still Ignoring The Company

SelectQuote, Inc. (NYSE:SLQT) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 45% in the last twelve months.

Although its price has surged higher, it would still be understandable if you think SelectQuote is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in the United States' Insurance industry have P/S ratios above 1.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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See our latest analysis for SelectQuote

What Does SelectQuote's Recent Performance Look Like?

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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on SelectQuote.

How Is SelectQuote's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 15% last year. The latest three year period has also seen an excellent 100% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the four analysts following the company. With the industry only predicted to deliver 5.3%, the company is positioned for a stronger revenue result.

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

The Final Word

Despite SelectQuote's share price climbing recently, its P/S still lags most other companies. 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.

A look at SelectQuote's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. 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.

Before you settle on your opinion, we've discovered 3 warning signs for SelectQuote (2 shouldn't be ignored!) that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.