There Is A Reason AMC Entertainment Holdings, Inc.'s (NYSE:AMC) Price Is Undemanding

You may think that with a price-to-sales (or "P/S") ratio of 0.6x AMC Entertainment Holdings, Inc. (NYSE:AMC) is a stock worth checking out, seeing as almost half of all the Entertainment companies in the United States have P/S ratios greater than 1.3x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for AMC Entertainment Holdings

How AMC Entertainment Holdings Has Been Performing

Recent times haven't been great for AMC Entertainment Holdings 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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think AMC Entertainment Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For AMC Entertainment Holdings?

There's an inherent assumption that a company should underperform the industry for P/S ratios like AMC Entertainment Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 29%. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 22% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 6.9% each year over the next three years. That's shaping up to be materially lower than the 9.7% each year growth forecast for the broader industry.

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.

What We Can Learn From 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.

As we suspected, our examination of AMC Entertainment Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you take the next step, you should know about the 4 warning signs for AMC Entertainment Holdings (1 doesn't sit too well with us!) that we have uncovered.

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.