Unfortunately for some shareholders, the Studio City International Holdings Limited (NYSE:MSC) share price has dived 28% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.
After such a large drop in price, Studio City International Holdings may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, considering almost half of all companies in the Hospitality industry in the United States have P/S ratios greater than 1.6x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
Check out our latest analysis for Studio City International Holdings
What Does Studio City International Holdings' P/S Mean For Shareholders?
Recent times have been quite advantageous for Studio City International Holdings as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. 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 out of favour.
Although there are no analyst estimates available for Studio City International Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.Is There Any Revenue Growth Forecasted For Studio City International Holdings?
The only time you'd be truly comfortable seeing a P/S as low as Studio City International Holdings' is when the company's growth is on track to lag the industry.
Retrospectively, the last year delivered an exceptional 43% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.
Comparing that to the industry, which is only predicted to deliver 14% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
With this information, we find it odd that Studio City International Holdings is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.
The Final Word
Studio City International Holdings' recently weak share price has pulled its P/S back below other Hospitality companies. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
Our examination of Studio City International Holdings revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.
You always need to take note of risks, for example - Studio City International Holdings has 1 warning sign we think you should be aware of.
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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