With a median price-to-sales (or "P/S") ratio of close to 1.4x in the Hospitality industry in the United States, you could be forgiven for feeling indifferent about Life Time Group Holdings, Inc.'s (NYSE:LTH) P/S ratio of 1.3x. 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.

What Does Life Time Group Holdings' Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Life Time Group Holdings has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Life Time Group Holdings' Revenue Growth Trending?

Life Time Group Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 134% in total over the last three years. 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 10% each year during the coming three years according to the ten analysts following the company. With the industry predicted to deliver 11% growth per annum, the company is positioned for a comparable revenue result.

With this information, we can see why Life Time Group Holdings is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On Life Time Group Holdings' 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 Life Time Group Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Hospitality industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

Before you take the next step, you should know about the 3 warning signs for Life Time Group Holdings (1 is significant!) that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.