FTAI Infrastructure Inc.'s (NASDAQ:FIP) price-to-sales (or "P/S") ratio of 2.7x may not look like an appealing investment opportunity when you consider close to half the companies in the Transportation industry in the United States have P/S ratios below 1.5x. 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.

How FTAI Infrastructure Has Been Performing

Recent revenue growth for FTAI Infrastructure has been in line with the industry. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For FTAI Infrastructure?

In order to justify its P/S ratio, FTAI Infrastructure would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 7.0%. Pleasingly, revenue has also lifted 176% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 25% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 7.9%, which is noticeably less attractive.

With this in mind, it's not hard to understand why FTAI Infrastructure's 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 Key Takeaway

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of FTAI Infrastructure'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. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 4 warning signs for FTAI Infrastructure (2 are potentially serious!) that you need to take into consideration.

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.