Many Still Looking Away From Pagaya Technologies Ltd. (NASDAQ:PGY)

Pagaya Technologies Ltd.'s (NASDAQ:PGY) price-to-sales (or "P/S") ratio of 1.2x might make it look like a strong buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 11x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Pagaya Technologies

What Does Pagaya Technologies' Recent Performance Look Like?

There hasn't been much to differentiate Pagaya Technologies' and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Pagaya Technologies?

Pagaya Technologies' P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were fairly tame in comparison. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 22% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 16% per year, which is noticeably less attractive.

In light of this, it's peculiar that Pagaya Technologies' 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 Bottom Line On Pagaya Technologies' P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To us, it seems Pagaya Technologies currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. 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.

It is also worth noting that we have found 2 warning signs for Pagaya Technologies that you need to take into consideration.

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.