Bragg Gaming Group Inc. (TSE:BRAG) Surges 29% Yet Its Low P/S Is No Reason For Excitement

Bragg Gaming Group Inc. (TSE:BRAG) shareholders are no doubt pleased to see that the share price has bounced 29% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 26% in the last twelve months.

Even after such a large jump in price, Bragg Gaming Group may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1x, considering almost half of all companies in the Hospitality industry in Canada have P/S ratios greater than 2.6x and even P/S higher than 8x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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Check out our latest analysis for Bragg Gaming Group

How Bragg Gaming Group Has Been Performing

Recent times haven't been great for Bragg Gaming Group as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Bragg Gaming Group.

How Is Bragg Gaming Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Bragg Gaming Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 9.1% gain to the company's revenues. The latest three year period has also seen an excellent 75% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 16% over the next year. With the industry predicted to deliver 202% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Bragg Gaming Group's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Bragg Gaming Group's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Bragg Gaming Group's P/S close to the industry median. 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.

As expected, our analysis of Bragg Gaming Group's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

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 Bragg Gaming Group with six simple checks.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.