There wouldn't be many who think i3 Verticals, Inc.'s (NASDAQ:IIIV) price-to-sales (or "P/S") ratio of 2.4x is worth a mention when the median P/S for the Diversified Financial industry in the United States is similar at about 2.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does i3 Verticals' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, i3 Verticals' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is i3 Verticals' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like i3 Verticals' is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 38%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Turning to the outlook, the next three years should generate growth of 7.2% per year as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.8% each year, which is not materially different.

With this in mind, it makes sense that i3 Verticals' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does i3 Verticals' P/S Mean For Investors?

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.

We've seen that i3 Verticals maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for i3 Verticals with six simple checks.

If these risks are making you reconsider your opinion on i3 Verticals, 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.