Melco Resorts & Entertainment Limited (NASDAQ:MLCO) shareholders would be excited to see that the share price has had a great month, posting a 40% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Even after such a large jump in price, Melco Resorts & Entertainment's price-to-sales (or "P/S") ratio of 0.8x might still make it look like a buy right now compared to the Hospitality industry in the United States, where around half of the companies have P/S ratios above 1.4x and even P/S above 4x 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.

What Does Melco Resorts & Entertainment's P/S Mean For Shareholders?

Recent times have been advantageous for Melco Resorts & Entertainment as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Is There Any Revenue Growth Forecasted For Melco Resorts & Entertainment?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Melco Resorts & Entertainment's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 95%. Pleasingly, revenue has also lifted 140% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 9.7% per year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 12% per annum growth forecast for the broader industry.

In light of this, it's peculiar that Melco Resorts & Entertainment's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Melco Resorts & Entertainment's P/S Mean For Investors?

Despite Melco Resorts & Entertainment's share price climbing recently, its P/S still lags most other companies. 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.

Our examination of Melco Resorts & Entertainment's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Melco Resorts & Entertainment that you should be aware of.

If you're unsure about the strength of Melco Resorts & 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.