Leptos Calypso Hotels Public Limited's (CSE:LCH) Shares Leap 37% Yet They're Still Not Telling The Full Story

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Leptos Calypso Hotels Public Limited (CSE:LCH) shares have continued their recent momentum with a 37% gain in the last month alone. The last 30 days were the cherry on top of the stock's 338% gain in the last year, which is nothing short of spectacular.

Even after such a large jump in price, it's still not a stretch to say that Leptos Calypso Hotels' price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Hospitality industry in Cyprus, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Leptos Calypso Hotels

What Does Leptos Calypso Hotels' Recent Performance Look Like?

Leptos Calypso Hotels has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Leptos Calypso Hotels will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Leptos Calypso Hotels would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. Pleasingly, revenue has also lifted 214% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 17% shows it's noticeably more attractive.

With this information, we find it interesting that Leptos Calypso Hotels is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Leptos Calypso Hotels' P/S Mean For Investors?

Leptos Calypso Hotels' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Leptos Calypso Hotels currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Leptos Calypso Hotels (at least 1 which is potentially serious), and understanding them should be part of your investment process.

If you're unsure about the strength of Leptos Calypso Hotels' 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.