BTG Hotels (Group) Co., Ltd.'s (SHSE:600258) Shares Bounce 26% But Its Business Still Trails The Industry

BTG Hotels (Group) Co., Ltd. (SHSE:600258) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 14% over that time.

Even after such a large jump in price, when around half the companies operating in China's Hospitality industry have price-to-sales ratios (or "P/S") above 4.9x, you may still consider BTG Hotels (Group) as an incredibly enticing stock to check out with its 2.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for BTG Hotels (Group)

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

Recent times haven't been great for BTG Hotels (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 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 BTG Hotels (Group) will help you uncover what's on the horizon.

How Is BTG Hotels (Group)'s Revenue Growth Trending?

BTG Hotels (Group)'s P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. The latest three year period has also seen a 21% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 3.3% over the next year. That's shaping up to be materially lower than the 26% 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. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From BTG Hotels (Group)'s P/S?

Shares in BTG Hotels (Group) have risen appreciably however, its P/S is still subdued. 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 expected, our analysis of BTG Hotels (Group)'s analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 1 warning sign for BTG Hotels (Group) that we have uncovered.

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.

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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.