Life Time Group Holdings, Inc.'s (NYSE:LTH) P/S Still Appears To Be Reasonable

There wouldn't be many who think Life Time Group Holdings, Inc.'s (NYSE:LTH) price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S for the Hospitality industry in the United States is similar at about 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Life Time Group Holdings

How Has Life Time Group Holdings Performed Recently?

Recent times haven't been great for Life Time Group Holdings 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. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Life Time Group Holdings.

How Is Life Time Group Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Life Time Group Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. The latest three year period has also seen an excellent 134% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 10% per year as estimated by the ten analysts watching the company. That's shaping up to be similar to the 11% each year growth forecast for the broader industry.

With this in mind, it makes sense that Life Time Group Holdings' P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Life Time Group Holdings' P/S?

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.

We've seen that Life Time Group Holdings maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Life Time Group Holdings (1 is significant!) that you need to be mindful of.

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.