Many Still Looking Away From Enthusiast Gaming Holdings Inc. (TSE:EGLX)

With a price-to-sales (or "P/S") ratio of 0.5x Enthusiast Gaming Holdings Inc. (TSE:EGLX) may be sending bullish signals at the moment, given that almost half of all the Interactive Media and Services companies in Canada have P/S ratios greater than 1.2x and even P/S higher than 21x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Enthusiast Gaming Holdings

How Enthusiast Gaming Holdings Has Been Performing

Enthusiast Gaming Holdings could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Enthusiast Gaming Holdings will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Enthusiast Gaming Holdings?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 7.6% last year. While this performance is only fair, the company was still able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 8.0% during the coming year according to the seven analysts following the company. That's shaping up to be similar to the 6.3% growth forecast for the broader industry.

With this information, we find it odd that Enthusiast Gaming Holdings is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Enthusiast Gaming Holdings' P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've seen that Enthusiast Gaming Holdings currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for Enthusiast Gaming Holdings that you should be aware of.

If these risks are making you reconsider your opinion on Enthusiast 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.