With a median price-to-sales (or "P/S") ratio of close to 1.6x in the Professional Services industry in the United States, you could be forgiven for feeling indifferent about Alight, Inc.'s (NYSE:ALIT) P/S ratio of 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does Alight's Recent Performance Look Like?

Recent times have been advantageous for Alight as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For Alight?

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

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen a 22% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 29% over the next year. That's not great when the rest of the industry is expected to grow by 6.7%.

In light of this, it's somewhat alarming that Alight's P/S sits in line with the majority of other companies. 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. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

While Alight's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Alight with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Alight, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.