Investors Interested In American Airlines Group Inc.'s (NASDAQ:AAL) Revenues

With a median price-to-sales (or "P/S") ratio of close to 0.5x in the Airlines industry in the United States, you could be forgiven for feeling indifferent about American Airlines Group Inc.'s (NASDAQ:AAL) P/S ratio of 0.2x. 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.

View our latest analysis for American Airlines Group

What Does American Airlines Group's P/S Mean For Shareholders?

American Airlines Group could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

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

In order to justify its P/S ratio, American Airlines Group would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 17% last year. The latest three year period has also seen an excellent 115% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 3.7% per year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 4.6% per annum growth forecast for the broader industry.

In light of this, it's understandable that American Airlines Group's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From American Airlines Group'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.

A American Airlines Group's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Airlines industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with American Airlines Group (at least 2 which are a bit unpleasant), and understanding these should be part of your investment process.

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.