BTG Hotels (Group) Co., Ltd.'s (SHSE:600258) Low P/S No Reason For Excitement

BTG Hotels (Group) Co., Ltd.'s (SHSE:600258) price-to-sales (or "P/S") ratio of 2.1x may look like a very appealing investment opportunity when you consider close to half the companies in the Hospitality industry in China have P/S ratios greater than 5.8x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for BTG Hotels (Group)

What Does BTG Hotels (Group)'s Recent Performance Look Like?

BTG Hotels (Group) could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 BTG Hotels (Group).

Is There Any Revenue Growth Forecasted For BTG Hotels (Group)?

In order to justify its P/S ratio, BTG Hotels (Group) would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 53% gain to the company's top line. Pleasingly, revenue has also lifted 48% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 4.8% per year over the next three years. That's shaping up to be materially lower than the 11% each year growth forecast for the broader industry.

With this information, we can see why BTG Hotels (Group) is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of BTG Hotels (Group)'s analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for BTG Hotels (Group) you should be aware of.

If you're unsure about the strength of BTG Hotels (Group)'s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.