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AccorHotels Ltd. (TSE:9704) Shareholders’ patience has paid off, with the share price up 70% in the last month. The annual gain over the past 30 days has reached 50%.
Even though its price has soared, not many people think AGORA Hospitality Group’s price-to-sales (P/S) ratio of 1.4x is worth mentioning, considering the Japanese hotel industry’s mid-range price-to-earnings ratio. Similar, about 1.1 times. Still, it’s unwise to simply ignore the price-to-sales ratio without explanation, as investors could be overlooking a unique opportunity or a costly mistake.
Check out our latest analysis for AGORA Hospitality Group
What does AGORA Hospitality Group’s P/S mean to shareholders?
AGORA Hospitality Group has performed very well recently with extremely strong revenue growth. The price-to-sales ratio is likely modest, as investors believe this strong revenue growth may not be enough to outperform the industry in the near future. Those who are bullish on AGORA Hospitality Group hope that’s not the case so they can buy the stock at a lower valuation.
Want a complete view of a company’s earnings, revenue and cash flow?then our free The AGORA Hotel Group report will help you understand its historical performance.
Do revenue forecasts match the price-to-sales ratio?
AGORA Hospitality Group’s price-to-earnings ratio is typical for a company that is only expected to grow modestly, and importantly, its performance is in line with the industry.
If we look back at last year’s revenue growth, the company’s revenue grew an impressive 48%. The recent strong performance means total revenue has grown 120% over the past three years. So it’s fair to say that the company’s recent revenue growth has been very good.
This is in stark contrast to the rest of the industry, which is expected to grow at 13% next year, well below the company’s recent mid-term annualized growth rate.
Armed with this information, we find it interesting that AGORA Hospitality Group’s P/E ratio is quite similar to the industry. Most investors probably don’t believe the company can sustain its recent growth rate.
AGORA Hospitality Group’s P/S Bottom Line
AGORA Hospitality Group appears to be back in favor, with a significant price increase that puts its price-to-sales ratio in line with the rest of the industry, but the price-to-sales ratio shouldn’t be the deciding factor in whether you buy the stock or shares. No, it’s a very effective barometer of revenue expectations.
We do not believe AGORA Hospitality Group’s price-to-sales ratio is in line with the broader industry, given that revenue growth over the past three years has been higher than the current industry outlook. When we see strong revenue and faster-than-industry growth, we can only assume that there are potential risks that could put pressure on the P/E ratio. While recent revenue trends over the past mid-term suggest lower risk of price declines, investors appear to see the potential for future revenue volatility.
It is also worth noting that we found 3 warning signs for AGORA Hospitality Group (2 should not be ignored!) You need to consider this.
certainly, Profitable companies with a history of huge profitable growth are generally safer bets.So you might want to check this out free A collection of other companies with reasonable price-to-earnings ratios and strong earnings growth.
Valuation is complex, but we’re helping to make it simple.
Find out if AGORA Hospitality Group is potentially overvalued or undervalued by checking out our comprehensive analysis, which includes Fair value estimates, risks and warnings, dividends, insider trading and financial health.
View free analysis
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This article from Simply Wall St is general in nature. We only use unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended to provide financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative information. Simply Wall St does not hold a position in any of the stocks mentioned.
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