After Leaping 28% Stewart Information Services Corporation (NYSE:STC) Shares Are Not Flying Under The Radar

The Stewart Information Services Corporation (NYSE:STC) share price has done very well over the last month, posting an excellent gain of 28%. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Stewart Information Services' P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Insurance industry in the United States is also close to 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Stewart Information Services

What Does Stewart Information Services' Recent Performance Look Like?

Stewart Information Services could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Stewart Information Services will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

Stewart Information Services' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 31% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 13% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 5.6% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 6.4%, which is not materially different.

In light of this, it's understandable that Stewart Information Services' P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Stewart Information Services' P/S

Stewart Information Services appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 Stewart Information Services' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Insurance industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Stewart Information Services (of which 1 is concerning!) you should know about.

If these risks are making you reconsider your opinion on Stewart Information Services, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.