OneSpaWorld Holdings Limited's (NASDAQ:OSW) Shareholders Might Be Looking For Exit

It's not a stretch to say that OneSpaWorld Holdings Limited's (NASDAQ:OSW) price-to-sales (or "P/S") ratio of 2x right now seems quite "middle-of-the-road" for companies in the Consumer Services industry in the United States, where the median P/S ratio is around 1.6x. 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.

Our free stock report includes 1 warning sign investors should be aware of before investing in OneSpaWorld Holdings. Read for free now.

View our latest analysis for OneSpaWorld Holdings

How Has OneSpaWorld Holdings Performed Recently?

With revenue growth that's inferior to most other companies of late, OneSpaWorld Holdings has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think OneSpaWorld Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

How Is OneSpaWorld Holdings' Revenue Growth Trending?

OneSpaWorld Holdings' 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 a decent 13% gain to the company's revenues. While this performance is only fair, the company was still able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 8.2% per annum during the coming three years according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 14% per annum, which is noticeably more attractive.

With this information, we find it interesting that OneSpaWorld Holdings is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. 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 OneSpaWorld Holdings' P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

When you consider that OneSpaWorld Holdings' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for OneSpaWorld Holdings you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.