Las Vegas Sands Corp.'s (NYSE:LVS) price-to-sales (or "P/S") ratio of 3.1x may not look like an appealing investment opportunity when you consider close to half the companies in the Hospitality industry in the United States have P/S ratios below 1.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

What Does Las Vegas Sands' P/S Mean For Shareholders?

Las Vegas Sands certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For Las Vegas Sands?

Las Vegas Sands' P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 112% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 7.5% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 12% per year, which is noticeably more attractive.

With this information, we find it concerning that Las Vegas Sands is trading at a P/S higher than the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What Does Las Vegas Sands' P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It comes as a surprise to see Las Vegas Sands trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Plus, you should also learn about these 3 warning signs we've spotted with Las Vegas Sands.

If you're unsure about the strength of Las Vegas Sands' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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