Market Might Still Lack Some Conviction On Leptos Calypso Hotels Public Limited (CSE:LCH) Even After 29% Share Price Boost

The Leptos Calypso Hotels Public Limited (CSE:LCH) share price has done very well over the last month, posting an excellent gain of 29%. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

Although its price has surged higher, it's still not a stretch to say that Leptos Calypso Hotels' price-to-sales (or "P/S") ratio of 0.3x 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.

See our latest analysis for Leptos Calypso Hotels

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

Revenue has risen firmly for Leptos Calypso Hotels recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on Leptos Calypso Hotels will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Leptos Calypso Hotels' earnings, revenue and cash flow.

How Is Leptos Calypso Hotels' Revenue Growth Trending?

Leptos Calypso Hotels' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 18% shows it's noticeably more attractive.

In light of this, it's curious that Leptos Calypso Hotels' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Final Word

Leptos Calypso Hotels appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

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. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Leptos Calypso Hotels that you should be aware of.

If these risks are making you reconsider your opinion on Leptos Calypso Hotels, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.