Global-E Online Ltd.'s (NASDAQ:GLBE) price-to-sales (or "P/S") ratio of 9.7x may look like a poor investment opportunity when you consider close to half the companies in the Multiline Retail industry in the United States have P/S ratios below 0.9x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

How Has Global-E Online Performed Recently?

With revenue growth that's superior to most other companies of late, Global-E Online has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Global-E Online will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Global-E Online?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Global-E Online's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 39%. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 34% per year over the next three years. With the industry only predicted to deliver 13% per annum, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Global-E Online's P/S sits above the majority of other companies. 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 Global-E Online 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.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Global-E Online with six simple checks on some of these key factors.

If you're unsure about the strength of Global-E Online'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.