There's No Escaping Liberty Latin America Ltd.'s (NASDAQ:LILA) Muted Revenues

Liberty Latin America Ltd.'s (NASDAQ:LILA) price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Telecom industry in the United States, where around half of the companies have P/S ratios above 1.3x 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.

Check out our latest analysis for Liberty Latin America

How Has Liberty Latin America Performed Recently?

Liberty Latin America could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

How Is Liberty Latin America's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.2%. This means it has also seen a slide in revenue over the longer-term as revenue is down 7.4% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 2.5% each year over the next three years. That's shaping up to be materially lower than the 139% per annum growth forecast for the broader industry.

In light of this, it's understandable that Liberty Latin America's 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.

What We Can Learn From Liberty Latin America's P/S?

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.

We've established that Liberty Latin America maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Liberty Latin America with six simple checks.

If you're unsure about the strength of Liberty Latin America's 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.