Benign Growth For AMC Entertainment Holdings, Inc. (NYSE:AMC) Underpins Stock's 25% Plummet

Unfortunately for some shareholders, the AMC Entertainment Holdings, Inc. (NYSE:AMC) share price has dived 25% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 92% share price decline.

Following the heavy fall in price, AMC Entertainment Holdings' price-to-sales (or "P/S") ratio of 0.2x might make it look like a buy right now compared to the Entertainment industry in the United States, where around half of the companies have P/S ratios above 1.2x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for AMC Entertainment Holdings

What Does AMC Entertainment Holdings' Recent Performance Look Like?

Recent times have been advantageous for AMC Entertainment Holdings as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is AMC Entertainment Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, AMC Entertainment Holdings would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. The strong recent performance means it was also able to grow revenue by 287% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 4.7% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 9.7% each year, which is noticeably more attractive.

With this information, we can see why AMC Entertainment Holdings is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On AMC Entertainment Holdings' P/S

AMC Entertainment Holdings' recently weak share price has pulled its P/S back below other Entertainment companies. 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 established that AMC Entertainment Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 4 warning signs for AMC Entertainment Holdings (2 are concerning!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.