Why We're Not Concerned About Xponential Fitness, Inc.'s (NYSE:XPOF) Share Price

With a median price-to-sales (or "P/S") ratio of close to 1.2x in the Hospitality industry in the United States, you could be forgiven for feeling indifferent about Xponential Fitness, Inc.'s (NYSE:XPOF) P/S ratio of 1.3x. 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 Xponential Fitness

How Xponential Fitness Has Been Performing

Recent revenue growth for Xponential Fitness has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on Xponential Fitness will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

Is There Some Revenue Growth Forecasted For Xponential Fitness?

In order to justify its P/S ratio, Xponential Fitness would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 34%. Pleasingly, revenue has also lifted 181% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 11% per year as estimated by the analysts watching the company. With the industry predicted to deliver 13% growth per year, the company is positioned for a comparable revenue result.

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

The Final Word

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.

We've seen that Xponential Fitness maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you settle on your opinion, we've discovered 3 warning signs for Xponential Fitness (2 are a bit unpleasant!) that you should be aware of.

If you're unsure about the strength of Xponential Fitness' 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.