Mandarin Oriental International Limited's (SGX:M04) Share Price Matching Investor Opinion

Mandarin Oriental International Limited's (SGX:M04) price-to-sales (or "P/S") ratio of 4.1x may look like a poor investment opportunity when you consider close to half the companies in the Hospitality industry in Singapore have P/S ratios below 1.6x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Mandarin Oriental International

What Does Mandarin Oriental International's Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for Mandarin Oriental International, which is generally not a bad outcome. Perhaps the market believes the recent revenue performance is strong enough to outperform the industry, which has inflated the P/S ratio. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Mandarin Oriental International's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Mandarin Oriental International's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.2% last year. This was backed up an excellent period prior to see revenue up by 189% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues 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.

With this in consideration, it's not hard to understand why Mandarin Oriental International's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

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.

As we suspected, our examination of Mandarin Oriental International revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for Mandarin Oriental International you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.