H World Group Limited's (NASDAQ:HTHT) price-to-sales (or "P/S") ratio of 4.2x may look like a poor investment opportunity when you consider close to half the companies in the Hospitality industry in the United States have P/S ratios below 1.3x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.
What Does H World Group's P/S Mean For Shareholders?
H World Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on analyst estimates for the company? Then our free report on H World Group will help you uncover what's on the horizon.
Is There Enough Revenue Growth Forecasted For H World Group?
H World Group's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 58%. The latest three year period has also seen an excellent 115% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Looking ahead now, revenue is anticipated to climb by 9.1% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 11% per annum, which is noticeably more attractive.
With this in consideration, we believe it doesn't make sense that H World Group's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.
What Does H World Group's P/S Mean For Investors?
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
It comes as a surprise to see H World Group trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.
You always need to take note of risks, for example - H World Group has 1 warning sign we think you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
考慮到美國酒店業將近一半的公司的市銷率低於1.3倍,H World Group Limited(納斯達克股票代碼:HTHT)4.2倍的市銷率(或 “市銷率”)可能看起來是一個糟糕的投資機會。但是,市銷率可能很高是有原因的,需要進一步調查以確定其是否合理。
H World Group的市銷率對股東意味着什麼?
H World Group最近確實做得很好,因爲其收入增長幅度超過了大多數其他公司。市銷率可能很高,因爲投資者認爲這種強勁的收入表現將繼續下去。但是,如果不是這樣,投資者可能會陷入爲股票支付過多費用的困境。
想全面了解分析師對公司的估計嗎?然後,我們關於H World Group的免費報告將幫助您發現即將發生的事情。
預計 H World Group 的收入增長是否足夠?
H World Group的市銷率對於一家預計將實現非常強勁的增長,而且重要的是,其表現要好於行業的公司來說是典型的。