Bally's Corporation (NYSE:BALY) Stock Catapults 49% Though Its Price And Business Still Lag The Industry

Bally's Corporation (NYSE:BALY) shares have had a really impressive month, gaining 49% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 5.4% isn't as attractive.

In spite of the firm bounce in price, given about half the companies operating in the United States' Hospitality industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Bally's as an attractive investment with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Bally's

What Does Bally's' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Bally's has been relatively sluggish. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is Bally's' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 7.1%. The latest three year period has seen an incredible overall rise in revenue, even though the last 12 month performance was only fair. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 5.2% during the coming year according to the ten analysts following the company. With the industry predicted to deliver 13% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Bally's' 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

Despite Bally's' share price climbing recently, its P/S still lags most other companies. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Bally's maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Bally's, and understanding them should be part of your investment process.

If you're unsure about the strength of Bally's' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.

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