There's Reason For Concern Over Las Vegas Sands Corp.'s (NYSE:LVS) Price

When you see that almost half of the companies in the Hospitality industry in the United States have price-to-sales ratios (or "P/S") below 1.2x, Las Vegas Sands Corp. (NYSE:LVS) looks to be giving off some sell signals with its 3.1x 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 Las Vegas Sands

How Has Las Vegas Sands Performed Recently?

With revenue growth that's superior to most other companies of late, Las Vegas Sands has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Las Vegas Sands' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Las Vegas Sands' is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 112% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 7.5% per year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 12% each year, which is noticeably more attractive.

With this in consideration, we believe it doesn't make sense that Las Vegas Sands' P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Las Vegas Sands' 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.

It comes as a surprise to see Las Vegas Sands trade at such a high P/S given the revenue forecasts look less than stellar. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

It is also worth noting that we have found 3 warning signs for Las Vegas Sands that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.