BlueBet Holdings Ltd's (ASX:BBT) P/S Is On The Mark

When close to half the companies in the Hospitality industry in Australia have price-to-sales ratios (or "P/S") below 1.4x, you may consider BlueBet Holdings Ltd (ASX:BBT) as a stock to potentially avoid with its 3.3x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for BlueBet Holdings

What Does BlueBet Holdings' P/S Mean For Shareholders?

BlueBet Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think BlueBet Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For BlueBet Holdings?

In order to justify its P/S ratio, BlueBet Holdings would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 80% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 46% each year over the next three years. With the industry only predicted to deliver 5.2% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why BlueBet Holdings' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does BlueBet Holdings' P/S Mean For Investors?

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 BlueBet Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Hospitality industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - BlueBet Holdings has 1 warning sign we think you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.