The price of Kingstone Companies, Inc. (NASDAQ:KINS) is good, but the growth is lacking

Kingstone Companies, Inc (NASDAQ:KINS) price-to-sales ratio (or “P/S”) of 0.3x might seem like a pretty attractive investment opportunity when you consider that nearly half of the companies in the insurance industry in the United States have P/S ratios greater then 1.1x. Although it is not wise to just take the P/S at face value as there may be an explanation as to why it is limited.

Check out our latest analysis for Kingstone Companies

How have Kingstone companies performed recently?

Kingstone Companies has been doing well lately as revenue has been growing at a solid pace. One possibility is that the price-to-earnings ratio is low because investors think this respectable revenue growth may underperform the broader sector in the near future. Those bullish on Kingstone Companies will hope this isn’t the case so they can buy the stock at a lower valuation.

Do you want a complete picture of the company’s income, turnover and cash flow? Then our free report on Kingstone Companies will help you shed light on its historical performance.

Is sales growth expected for Kingstone businesses?

The only time you’ll really feel comfortable seeing a P/S as low as Kingstone Companies’ is when the company’s growth is on track to lag the industry.

Retrospectively, the past year delivered a significant 11% increase in the company’s turnover. Solid recent performance also allowed the company to grow revenue by a total of 9.8% over the past three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Comparing recent medium-term revenue trends with the industry’s one-year growth forecast of 6.0% shows it to be noticeably less attractive.

With this in mind, it’s easy to understand why Kingstone Companies’ P/S doesn’t meet industry peer standards. It appears that most investors expect the recent limited growth rates to continue in the future and are only willing to pay a lower amount for the stock.

The most important takeaway

It’s not wise to use price-to-sales ratio alone to determine whether you should sell your shares, but it can provide a practical guide to the company’s future prospects.

In line with expectations, Kingstone Companies maintains its low price-to-earnings ratio as the weakness in recent three-year growth is lower than the broader sector forecast. At this point, shareholders accept the low price-to-earnings ratio, as they admit that future earnings are unlikely to deliver any pleasant surprises. If recent medium-term revenue trends continue, it’s hard to see the share price experiencing a turnaround anytime soon.

There are also other vital risk factors to consider, and we discovered that 4 warning signs for Kingstone Companies (2 are concerning!) What to consider before investing here.

If strong companies that make profits interest you, then you’ll definitely want to check this out free list of interesting companies that trade at a low price/earnings (but have proven that they can grow their profits).

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.