NorthStar Gaming Holdings Inc.'s (CVE:BET) Low P/S No Reason For Excitement

With a price-to-sales (or "P/S") ratio of 0.2x NorthStar Gaming Holdings Inc. (CVE:BET) may be sending bullish signals at the moment, given that almost half of all the Hospitality companies in Canada have P/S ratios greater than 2.2x and even P/S higher than 6x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for NorthStar Gaming Holdings

What Does NorthStar Gaming Holdings' P/S Mean For Shareholders?

NorthStar Gaming Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on NorthStar Gaming Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on NorthStar Gaming Holdings' earnings, revenue and cash flow.

How Is NorthStar Gaming Holdings' Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 65% last year. Still, revenue has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 216% shows it's noticeably less attractive.

With this information, we can see why NorthStar Gaming Holdings is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does NorthStar Gaming Holdings' P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of NorthStar Gaming Holdings revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

It is also worth noting that we have found 6 warning signs for NorthStar Gaming Holdings (4 are significant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on NorthStar Gaming Holdings, 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.