Subdued Growth No Barrier To Wynn Resorts, Limited's (NASDAQ:WYNN) Price

When close to half the companies in the Hospitality industry in the United States have price-to-sales ratios (or "P/S") below 1.3x, you may consider Wynn Resorts, Limited (NASDAQ:WYNN) as a stock to potentially avoid with its 1.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Wynn Resorts

How Has Wynn Resorts Performed Recently?

With revenue growth that's superior to most other companies of late, Wynn Resorts has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Wynn Resorts' Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Wynn Resorts' to be considered reasonable.

Retrospectively, the last year delivered an exceptional 50% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 86% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 12% per annum during the coming three years according to the analysts following the company. With the industry predicted to deliver 13% growth per annum, the company is positioned for a comparable revenue result.

In light of this, it's curious that Wynn Resorts' P/S sits above the majority of other companies. It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Wynn Resorts' 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 Wynn Resorts' future revenue forecasts are in line with the wider industry, the fact that it trades at an elevated P/S is somewhat surprising. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Wynn Resorts (of which 2 are a bit unpleasant!) you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.