Investors Holding Back On RenaissanceRe Holdings Ltd. (NYSE:RNR)

RenaissanceRe Holdings Ltd. -0.86%

RenaissanceRe Holdings Ltd.




There wouldn't be many who think RenaissanceRe Holdings Ltd.'s (NYSE:RNR) price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S for the Insurance industry in the United States is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for RenaissanceRe Holdings

NYSE:RNR Price to Sales Ratio vs Industry December 28th 2023

How RenaissanceRe Holdings Has Been Performing

RenaissanceRe Holdings certainly has been doing a good job lately as it's been growing revenue more 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

How Is RenaissanceRe Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, RenaissanceRe Holdings would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 77% gain to the company's top line. Pleasingly, revenue has also lifted 63% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 11% per annum as estimated by the nine analysts watching the company. That's shaping up to be materially higher than the 4.3% per year growth forecast for the broader industry.

In light of this, it's curious that RenaissanceRe Holdings' P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On RenaissanceRe Holdings' P/S

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.

Despite enticing revenue growth figures that outpace the industry, RenaissanceRe Holdings' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware RenaissanceRe Holdings is showing 1 warning sign 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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