FL Entertainment N.V.’s (AMS:FLE) price-to-sales (or “P/S”) ratio of 0.8x might make it look like a buy right now compared to the Entertainment industry in the Netherlands, where around half of the companies have P/S ratios above 1.9x and even P/S above 6x are quite common. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for FL Entertainment

How Has FL Entertainment Performed Recently?

FL Entertainment could be doing better as it’s been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on FL Entertainment will help you uncover what’s on the horizon.

Is There Any Revenue Growth Forecasted For FL Entertainment?

FL Entertainment’s P/S ratio would be typical for a company that’s only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 9.1%. The latest three year period has also seen an excellent 97% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 8.8% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 8.7% per year, which is not materially different.

With this in consideration, we find it intriguing that FL Entertainment’s P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

Story continues

The Bottom Line On FL Entertainment’s P/S

While the price-to-sales ratio shouldn’t be the defining factor in whether you buy a stock or not, it’s quite a capable barometer of revenue expectations.

It looks to us like the P/S figures for FL Entertainment remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Before you take the next step, you should know about the 4 warning signs for FL Entertainment (1 makes us a bit uncomfortable!) that we have uncovered.

If you’re unsure about the strength of FL Entertainment’s business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.