Investors Appear Satisfied With Enfusion, Inc.'s (NYSE:ENFN) Prospects As Shares Rocket 28%

Enfusion, Inc. (NYSE:ENFN) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 4.4% isn't as impressive.

Even after such a large jump in price, there still wouldn't be many who think Enfusion's price-to-sales (or "P/S") ratio of 5.3x is worth a mention when the median P/S in the United States' Software industry is similar at about 4.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Enfusion

How Enfusion Has Been Performing

Recent times have been advantageous for Enfusion as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Do Revenue Forecasts Match The P/S Ratio?

Enfusion's 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.

Taking a look back first, we see that the company grew revenue by an impressive 19% last year. The latest three year period has also seen an excellent 112% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 16% over the next year. That's shaping up to be similar to the 15% growth forecast for the broader industry.

With this information, we can see why Enfusion is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Enfusion's P/S Mean For Investors?

Enfusion's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A Enfusion's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Software industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Enfusion that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.