Lacklustre Performance Is Driving AMC Entertainment Holdings, Inc.'s (NYSE:AMC) Low P/S

AMC Entertainment Holdings, Inc.'s (NYSE:AMC) price-to-sales (or "P/S") ratio of 0.4x 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 1.4x and even P/S above 5x 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

How Has AMC Entertainment Holdings Performed Recently?

With revenue growth that's superior to most other companies of late, AMC Entertainment Holdings has been doing relatively well. 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 you like the company, you'd be hoping this isn't the case so that you could potentially 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 AMC Entertainment Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

AMC Entertainment Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 1.5% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 11%, which is noticeably more attractive.

In light of this, it's understandable that AMC Entertainment Holdings' P/S sits below the majority of other companies. 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

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

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. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 4 warning signs for AMC Entertainment Holdings (3 shouldn't be ignored!) that you need to be mindful of.

If you're unsure about the strength of AMC Entertainment Holdings' 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.

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