A Piece Of The Puzzle Missing From LuxUrban Hotels Inc.'s (NASDAQ:LUXH) 31% Share Price Climb

LuxUrban Hotels Inc. (NASDAQ:LUXH) shares have continued their recent momentum with a 31% gain in the last month alone. The annual gain comes to 247% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, there still wouldn't be many who think LuxUrban Hotels' price-to-sales (or "P/S") ratio of 1.9x is worth a mention when the median P/S in the United States' Real Estate industry is similar at about 1.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for LuxUrban Hotels

How Has LuxUrban Hotels Performed Recently?

LuxUrban Hotels certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. 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 not quite in favour.

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

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

The only time you'd be comfortable seeing a P/S like LuxUrban Hotels' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 159% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 132% during the coming year according to the three analysts following the company. That's shaping up to be materially higher than the 10% growth forecast for the broader industry.

In light of this, it's curious that LuxUrban Hotels' P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From LuxUrban Hotels' P/S?

LuxUrban Hotels' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Despite enticing revenue growth figures that outpace the industry, LuxUrban Hotels' P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware LuxUrban Hotels is showing 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable.

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.