Investors Interested In White Mountains Insurance Group, Ltd.'s (NYSE:WTM) Revenues

When close to half the companies in the Insurance industry in the United States have price-to-sales ratios (or "P/S") below 1.1x, you may consider White Mountains Insurance Group, Ltd. (NYSE:WTM) as a stock to potentially avoid with its 2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for White Mountains Insurance Group

What Does White Mountains Insurance Group's Recent Performance Look Like?

White Mountains Insurance Group certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on White Mountains Insurance Group's earnings, revenue and cash flow.

How Is White Mountains Insurance Group's Revenue Growth Trending?

In order to justify its P/S ratio, White Mountains Insurance Group would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered an exceptional 87% gain to the company's top line. Pleasingly, revenue has also lifted 142% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 6.9% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that White Mountains Insurance Group's P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From White Mountains Insurance Group's 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.

We've established that White Mountains Insurance Group maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for White Mountains Insurance Group with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on White Mountains Insurance Group, 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.