Century Casinos, Inc.'s (NASDAQ:CNTY) Shares Bounce 48% But Its Business Still Trails The Industry

Those holding Century Casinos, Inc. (NASDAQ:CNTY) shares would be relieved that the share price has rebounded 48% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

Even after such a large jump in price, Century Casinos' price-to-sales (or "P/S") ratio of 0.1x might still make it look like a buy right now compared to the Hospitality industry in the United States, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

We've discovered 3 warning signs about Century Casinos. View them for free.

View our latest analysis for Century Casinos

What Does Century Casinos' P/S Mean For Shareholders?

Century Casinos could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

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

In order to justify its P/S ratio, Century Casinos would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 1.3% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 36% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 5.2% during the coming year according to the four analysts following the company. With the industry predicted to deliver 15% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Century Casinos' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Century Casinos' P/S

The latest share price surge wasn't enough to lift Century Casinos' P/S close to 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.

As expected, our analysis of Century Casinos' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Century Casinos that you should be aware of.

If these risks are making you reconsider your opinion on Century Casinos, 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.