MoneyLion Inc. (NYSE:ML) shares have had a really impressive month, gaining 39% after a shaky period beforehand. The last month tops off a massive increase of 112% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about MoneyLion's P/S ratio of 1.3x, since the median price-to-sales (or "P/S") ratio for the Consumer Finance industry in the United States is also close to 1.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

How MoneyLion Has Been Performing

With revenue growth that's superior to most other companies of late, MoneyLion has been doing relatively well. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MoneyLion.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 24% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 22% over the next year. Meanwhile, the rest of the industry is forecast to expand by 32%, which is noticeably more attractive.

With this in mind, we find it intriguing that MoneyLion's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

MoneyLion's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Given that MoneyLion's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware MoneyLion is showing 2 warning signs in our investment analysis, you should know about.

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.