Corporate Travel Management Limited (ASX:CTD) Not Lagging Industry On Growth Or Pricing

Corporate Travel Management Limited's (ASX:CTD) price-to-sales (or "P/S") ratio of 4.4x may look like a poor investment opportunity when you consider close to half the companies in the Hospitality industry in Australia have P/S ratios below 1.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Corporate Travel Management

How Has Corporate Travel Management Performed Recently?

Corporate Travel Management 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on Corporate Travel Management will help you uncover what's on the horizon.

How Is Corporate Travel Management's Revenue Growth Trending?

In order to justify its P/S ratio, Corporate Travel Management would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an exceptional 73% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 107% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 14% per year during the coming three years according to the analysts following the company. That's shaping up to be materially higher than the 9.2% per year growth forecast for the broader industry.

With this information, we can see why Corporate Travel Management is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

As we suspected, our examination of Corporate Travel Management's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Corporate Travel Management with six simple checks.

If these risks are making you reconsider your opinion on Corporate Travel Management, 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.