Sportradar Group AG's (NASDAQ:SRAD) price-to-sales (or "P/S") ratio of 3.5x may look like a poor 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. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Sportradar Group

How Sportradar Group Has Been Performing

Recent times haven't been great for Sportradar Group as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For Sportradar Group?

The only time you'd be truly comfortable seeing a P/S as steep as Sportradar Group's is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. The latest three year period has also seen an excellent 105% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 16% per year during the coming three years according to the twelve analysts following the company. With the industry only predicted to deliver 13% per year, the company is positioned for a stronger revenue result.

With this information, we can see why Sportradar Group is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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.

As we suspected, our examination of Sportradar Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Sportradar Group with six simple checks.

If these risks are making you reconsider your opinion on Sportradar Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.