Atlanta Braves Holdings, Inc.'s (NASDAQ:BATR.K) Business Is Trailing The Industry But Its Shares Aren't

Atlanta Braves Holdings, Inc.'s (NASDAQ:BATR.K) price-to-sales (or "P/S") ratio of 3.5x may look like a poor investment opportunity when you consider close to half the companies in the Entertainment industry in the United States have P/S ratios below 1.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Atlanta Braves Holdings

How Has Atlanta Braves Holdings Performed Recently?

Recent times haven't been great for Atlanta Braves Holdings as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. 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 Atlanta Braves Holdings.

What Are Revenue Growth Metrics Telling Us About The High P/S?

The only time you'd be truly comfortable seeing a P/S as steep as Atlanta Braves Holdings' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a decent 5.3% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 35% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 5.5% each year over the next three years. That's shaping up to be materially lower than the 11% per year growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that Atlanta Braves Holdings' 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. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've concluded that Atlanta Braves Holdings currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. 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's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Atlanta Braves Holdings, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Atlanta Braves Holdings, 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.