Unpleasant Surprises Could Be In Store For Hawaiian Holdings, Inc.'s (NASDAQ:HA) Shares

There wouldn't be many who think Hawaiian Holdings, Inc.'s (NASDAQ:HA) price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S for the Airlines industry in the United States is very similar. 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.

Check out our latest analysis for Hawaiian Holdings

What Does Hawaiian Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Hawaiian Holdings' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Hawaiian Holdings' Revenue Growth Trending?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were nothing to write home about. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the five analysts following the company. With the industry predicted to deliver 39% growth, the company is positioned for a weaker revenue result.

In light of this, it's curious that Hawaiian Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does Hawaiian Holdings' P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Given that Hawaiian Holdings' revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. A positive change is needed in order to justify the current price-to-sales ratio.

It is also worth noting that we have found 2 warning signs for Hawaiian Holdings that you need to take into consideration.

If you're unsure about the strength of Hawaiian 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com