Remitly Global, Inc. (NASDAQ:RELY) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 16% share price drop.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Remitly Global's P/S ratio of 2.9x, since the median price-to-sales (or "P/S") ratio for the Diversified Financial industry in the United States is also close to 2.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has Remitly Global Performed Recently?

Recent times have been advantageous for Remitly Global as its revenues have been rising faster than most other companies. 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.

How Is Remitly Global's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 40% last year. Pleasingly, revenue has also lifted 234% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 24% per annum over the next three years. That's shaping up to be materially higher than the 10% each year growth forecast for the broader industry.

In light of this, it's curious that Remitly Global's 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 Remitly Global's P/S

With its share price dropping off a cliff, the P/S for Remitly Global looks to be in line with the rest of the Diversified Financial industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Remitly Global currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Remitly Global that you should be aware of.

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

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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.