The The ONE Group Hospitality, Inc. (NASDAQ:STKS) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 47% in that time.

Since its price has dipped substantially, given about half the companies operating in the United States' Hospitality industry have price-to-sales ratios (or "P/S") above 1.3x, you may consider ONE Group Hospitality as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How ONE Group Hospitality Has Been Performing

Recent times have been advantageous for ONE Group Hospitality as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on ONE Group Hospitality will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

ONE Group Hospitality's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. Pleasingly, revenue has also lifted 106% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 97% over the next year. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.

With this information, we find it odd that ONE Group Hospitality is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does ONE Group Hospitality's P/S Mean For Investors?

The southerly movements of ONE Group Hospitality's shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

To us, it seems ONE Group Hospitality currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Before you settle on your opinion, we've discovered 1 warning sign for ONE Group Hospitality that you should be aware of.

If these risks are making you reconsider your opinion on ONE Group Hospitality, 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.