Frontier Group Holdings, Inc. (NASDAQ:ULCC) Stock Rockets 55% But Many Are Still Ignoring The Company

Frontier Group Holdings, Inc. (NASDAQ:ULCC) shares have continued their recent momentum with a 55% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Frontier Group Holdings' price-to-sales (or "P/S") ratio of 0.5x is worth a mention when it essentially matches the median P/S in the United States' Airlines industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Frontier Group Holdings

How Frontier Group Holdings Has Been Performing

With revenue growth that's inferior to most other companies of late, Frontier Group Holdings has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. 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 Frontier Group Holdings.

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 7.9%. The latest three year period has also seen an excellent 187% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 15% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 5.7% per annum, which is noticeably less attractive.

With this in consideration, we find it intriguing that Frontier Group Holdings' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does Frontier Group Holdings' P/S Mean For Investors?

Its shares have lifted substantially and now Frontier Group Holdings' P/S is back within range of the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite enticing revenue growth figures that outpace the industry, Frontier Group Holdings' P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Frontier Group Holdings that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.