Lacklustre Performance Is Driving Vivid Seats Inc.'s (NASDAQ:SEAT) 34% Price Drop

Vivid Seats Inc. (NASDAQ:SEAT) shareholders won't be pleased to see that the share price has had a very rough month, dropping 34% and undoing the prior period's positive performance. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 51% loss during that time.

Even after such a large drop in price, Vivid Seats may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.5x, since almost half of all companies in the Entertainment industry in the United States have P/S ratios greater than 1.1x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Vivid Seats

What Does Vivid Seats' P/S Mean For Shareholders?

Recent times haven't been great for Vivid Seats as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is Vivid Seats' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Vivid Seats' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.8% last year. Pleasingly, revenue has also lifted 75% 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.

Turning to the outlook, the next three years should generate growth of 4.6% per year as estimated by the analysts watching the company. With the industry predicted to deliver 12% growth per year, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Vivid Seats' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Vivid Seats' P/S

Vivid Seats' P/S has taken a dip along with its share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Vivid Seats' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Vivid Seats is showing 2 warning signs in our investment analysis, you should know about.

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.