Investors Appear Satisfied With Global-e Online Ltd.'s (NASDAQ:GLBE) Prospects

When you see that almost half of the companies in the Multiline Retail industry in the United States have price-to-sales ratios (or "P/S") below 0.8x, Global-e Online Ltd. (NASDAQ:GLBE) looks to be giving off strong sell signals with its 15.2x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Global-e Online

What Does Global-e Online's P/S Mean For Shareholders?

Global-e Online certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Global-e Online will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Global-e Online's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 64%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 38% per year as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 12% per annum growth forecast for the broader industry.

In light of this, it's understandable that Global-e Online's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Global-e Online's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Global-e Online maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Multiline Retail industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Global-e Online 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.