When close to half the companies in the Insurance industry in the United States have price-to-sales ratios (or "P/S") below 1x, you may consider White Mountains Insurance Group, Ltd. (NYSE:WTM) as a stock to potentially avoid with its 1.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for White Mountains Insurance Group

How White Mountains Insurance Group Has Been Performing

Recent times have been quite advantageous for White Mountains Insurance Group as its revenue has been rising very briskly. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

How Is White Mountains Insurance Group's Revenue Growth Trending?

In order to justify its P/S ratio, White Mountains Insurance Group would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 90% last year. The latest three year period has also seen an excellent 124% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 6.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in consideration, it's not hard to understand why White Mountains Insurance Group's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does White Mountains Insurance Group's 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.

As we suspected, our examination of White Mountains Insurance Group revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, 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 before investing and we've discovered 2 warning signs for White Mountains Insurance Group that you should be aware of.

If you're unsure about the strength of White Mountains Insurance Group's 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.