Market Cool On Regional Express Holdings Limited's (ASX:REX) Revenues

It's not a stretch to say that Regional Express Holdings Limited's (ASX:REX) price-to-sales (or "P/S") ratio of 0.2x right now seems quite "middle-of-the-road" for companies in the Airlines industry in Australia, where the median P/S ratio is around 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Regional Express Holdings

What Does Regional Express Holdings' Recent Performance Look Like?

Regional Express Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Regional Express Holdings will help you shine a light on its historical performance.

How Is Regional Express Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Regional Express Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 125%. Pleasingly, revenue has also lifted 146% 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.

When compared to the industry's one-year growth forecast of 15%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Regional Express Holdings is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Regional Express Holdings' P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Regional Express Holdings currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

Having said that, be aware Regional Express Holdings is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.