Promotora de Hoteles Norte 19, S.A.B. de C.V. (BMV:HCITY) Stock Rockets 34% As Investors Are Less Pessimistic Than Expected

Promotora de Hoteles Norte 19, S.A.B. de C.V. (BMV:HCITY) shareholders have had their patience rewarded with a 34% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 43% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Promotora de Hoteles Norte 19. de's P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Hospitality industry in Mexico is about the same. 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 Promotora de Hoteles Norte 19. de

How Promotora de Hoteles Norte 19. de Has Been Performing

Recent revenue growth for Promotora de Hoteles Norte 19. de has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on Promotora de Hoteles Norte 19. de will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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Is There Some Revenue Growth Forecasted For Promotora de Hoteles Norte 19. de?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Promotora de Hoteles Norte 19. de's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 7.7%. The latest three year period has also seen an excellent 41% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 10% per year during the coming three years according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 15% per annum, which is noticeably more attractive.

In light of this, it's curious that Promotora de Hoteles Norte 19. de's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On Promotora de Hoteles Norte 19. de's P/S

Its shares have lifted substantially and now Promotora de Hoteles Norte 19. de's P/S is back within range of the industry median. 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.

Given that Promotora de Hoteles Norte 19. de's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. 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.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Promotora de Hoteles Norte 19. de with six simple checks.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.