Pinning Down lastminute.com N.V.'s (VTX:LMN) P/S Is Difficult Right Now

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Hospitality industry in Switzerland, you could be forgiven for feeling indifferent about lastminute.com N.V.'s (VTX:LMN) P/S ratio of 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for lastminute.com

How Has lastminute.com Performed Recently?

With revenue growth that's inferior to most other companies of late, lastminute.com has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For lastminute.com?

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

If we review the last year of revenue growth, the company posted a worthy increase of 7.7%. Pleasingly, revenue has also lifted 203% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 10% per year as estimated by the lone analyst watching the company. With the industry predicted to deliver 76% growth per annum, the company is positioned for a weaker revenue result.

In light of this, it's curious that lastminute.com's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does lastminute.com's 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.

Our look at the analysts forecasts of lastminute.com's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

You should always think about risks. Case in point, we've spotted 1 warning sign for lastminute.com you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.