Full House Resorts, Inc.'s (NASDAQ:FLL) Price Is Right But Growth Is Lacking After Shares Rocket 31%

Full House Resorts, Inc. (NASDAQ:FLL) shareholders have had their patience rewarded with a 31% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 17% over that time.

Although its price has surged higher, Full House Resorts may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Hospitality industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Full House Resorts

How Full House Resorts Has Been Performing

Full House Resorts' revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on Full House Resorts will be hoping that this isn't the case.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Full House Resorts.

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

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

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. Pleasingly, revenue has also lifted 66% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 7.6% over the next year. That's shaping up to be materially lower than the 15% growth forecast for the broader industry.

With this in consideration, its clear as to why Full House Resorts' P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

The latest share price surge wasn't enough to lift Full House Resorts' P/S close to the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Full House Resorts' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Full House Resorts (at least 1 which is concerning), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Full House Resorts, 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.