Some Shareholders Feeling Restless Over Global Business Travel Group, Inc.’s (NYSE:GBTG) P/S Ratio

Date:

There wouldn’t be many who think Global Business Travel Group, Inc.’s (NYSE:GBTG) price-to-sales (or “P/S”) ratio of 1.1x is worth a mention when the median P/S for the Hospitality industry in the United States is similar at about 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Global Business Travel Group

NYSE:GBTG Price to Sales Ratio vs Industry November 9th 2023

How Global Business Travel Group Has Been Performing

Recent times have been advantageous for Global Business Travel Group as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Global Business Travel Group’s future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you’d be comfortable seeing a P/S like Global Business Travel Group’s is when the company’s growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 41% gain to the company’s top line. Pleasingly, revenue has also lifted 186% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 7.6% as estimated by the five analysts watching the company. That’s shaping up to be materially lower than the 18% growth forecast for the broader industry.

With this information, we find it interesting that Global Business Travel Group is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Global Business Travel Group’s P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Given that Global Business Travel Group’s 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. This places shareholders’ investments at risk and potential investors in danger of paying an unnecessary premium.

A lot of potential risks can sit within a company’s balance sheet. You can assess many of the main risks through our free balance sheet analysis for Global Business Travel Group with six simple checks.

If strong companies turning a profit tickle your fancy, then you’ll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Valuation is complex, but we’re helping make it simple.

Find out whether Global Business Travel Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.

Share post:

Subscribe

Popular

More like this
Related

Chicago Bulls win their first NBA championship – Chicago Tribune

Today’s Sports Highlight in History:In 1991, the Chicago Bulls...

What corporate finance teams should know about SBTi’s new financial sector guidance

The Science Based Targets initiative will requires banks and...

Sabre reveals key outbound Chinese travel insights for 2024

The travel industry has been waiting. Waiting for Chinese...

The Scarce Energy Foundation Dubai Share Event was successfully held recently

The event focused on scarce energy and attracted the...