With Surf Air Mobility Inc. (NYSE:SRFM) It Looks Like You'll Get What You Pay For

When you see that almost half of the companies in the Airlines industry in the United States have price-to-sales ratios (or "P/S") below 0.4x, Surf Air Mobility Inc. (NYSE:SRFM) looks to be giving off some sell signals with its 1.9x 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 Surf Air Mobility

What Does Surf Air Mobility's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Surf Air Mobility has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Surf Air Mobility's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 106% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. 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 three analysts covering the company suggest revenue should grow by 91% each year over the next three years. That's shaping up to be materially higher than the 4.7% per annum growth forecast for the broader industry.

With this information, we can see why Surf Air Mobility is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Surf Air Mobility's P/S Mean For Investors?

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.

As we suspected, our examination of Surf Air Mobility's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 4 warning signs for Surf Air Mobility (2 are concerning!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Surf Air Mobility, 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.