Global Business Travel Group, Inc.’s (NYSE:GBTG) Business Is Trailing The Industry But Its Shares Aren’t

With a median price-to-sales (or “P/S”) ratio of close to 1.3x in the Hospitality industry in the United States, you could be forgiven for feeling indifferent about Global Business Travel Group, Inc.’s (NYSE:GBTG) P/S ratio, which comes in at about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Global Business Travel Group

What Does Global Business Travel Group’s P/S Mean For Shareholders?

Global Business Travel Group’s revenue growth of late has been pretty similar to most other companies. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If this is the case, then at least existing shareholders won’t be losing sleep over the current 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.

Is There Some Revenue Growth Forecasted For Global Business Travel Group?

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.

Taking a look back first, we see that the company grew revenue by an impressive 41% last year. The strong recent performance means it was also able to grow revenue by 186% in total over the last three years. Therefore, it’s fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 7.5% over the next year. With the industry predicted to deliver 17% growth, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Global Business Travel Group’s P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

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The Key Takeaway

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.

When you consider that Global Business Travel Group’s revenue growth estimates are fairly muted compared to the broader industry, it’s easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

The company’s balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Global Business Travel Group with six simple checks on some of these key factors.

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.