Investor Optimism Abounds Codere Online Luxembourg, S.A. (NASDAQ:CDRO) But Growth Is Lacking

It's not a stretch to say that Codere Online Luxembourg, S.A.'s (NASDAQ:CDRO) price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" for companies in the Hospitality industry in the United States, where the median P/S ratio is around 1.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Codere Online Luxembourg

How Has Codere Online Luxembourg Performed Recently?

Recent revenue growth for Codere Online Luxembourg has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on Codere Online Luxembourg will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

Want the full picture on analyst estimates for the company? Then our free report on Codere Online Luxembourg will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

Codere Online Luxembourg's 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.

Retrospectively, the last year delivered an exceptional 44% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 88% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 23% during the coming year according to the three analysts following the company. That's shaping up to be materially lower than the 27% growth forecast for the broader industry.

In light of this, it's curious that Codere Online Luxembourg's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Codere Online Luxembourg's P/S?

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.

Given that Codere Online Luxembourg'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. A positive change is needed in order to justify the current price-to-sales ratio.

You should always think about risks. Case in point, we've spotted 2 warning signs for Codere Online Luxembourg you should be aware of, and 1 of them is concerning.

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

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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.