APi Group Corporation's (NYSE:APG) price-to-sales (or "P/S") ratio of 1.5x may not look like an appealing investment opportunity when you consider close to half the companies in the Construction industry in the United States have P/S ratios below 0.9x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

How APi Group Has Been Performing

Recent times haven't been great for APi Group as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

Keen to find out how analysts think APi Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For APi Group?

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

Retrospectively, the last year delivered a decent 3.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 96% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 5.8% during the coming year according to the nine analysts following the company. With the industry predicted to deliver 10.0% growth, the company is positioned for a weaker revenue result.

With this information, we find it concerning that APi Group is trading at a P/S higher than the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

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.

It comes as a surprise to see APi Group trade at such a high P/S given the revenue forecasts look less than stellar. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It is also worth noting that we have found 1 warning sign for APi Group that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

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