When you see that almost half of the companies in the Insurance industry in the United States have price-to-sales ratios (or "P/S") below 1.1x, Ryan Specialty Holdings, Inc. (NYSE:RYAN) looks to be giving off strong sell signals with its 3.2x 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.

What Does Ryan Specialty Holdings' Recent Performance Look Like?

Recent times have been advantageous for Ryan Specialty Holdings as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For Ryan Specialty Holdings?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Ryan Specialty Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Pleasingly, revenue has also lifted 89% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 21% as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 6.5% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Ryan Specialty Holdings' P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

Our look into Ryan Specialty Holdings shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Ryan Specialty Holdings you should know about.

If you're unsure about the strength of Ryan Specialty Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com