What Global Business Travel Group, Inc.'s (NYSE:GBTG) P/S Is Not Telling You

There wouldn't be many who think Global Business Travel Group, Inc.'s (NYSE:GBTG) price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S for the Hospitality industry in the United States is similar at about 1.4x. 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.

Check out our latest analysis for Global Business Travel Group

How Global Business Travel Group Has Been Performing

Recent times haven't been great for Global Business Travel Group as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Global Business Travel Group.

How Is Global Business Travel Group's Revenue Growth Trending?

In order to justify its P/S ratio, Global Business Travel Group would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a decent 7.8% gain to the company's revenues. Pleasingly, revenue has also lifted 288% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 7.1% during the coming year according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 13%, which is noticeably more attractive.

In light of this, it's curious that Global Business Travel Group's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Global Business Travel Group's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Given that Global Business Travel Group's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Global Business Travel Group with six simple checks.

If these risks are making you reconsider your opinion on Global Business Travel Group, 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.