It's not a stretch to say that Life Time Group Holdings, Inc.'s (NYSE:LTH) price-to-sales (or "P/S") ratio of 1.1x right now seems quite "middle-of-the-road" for companies in the Hospitality industry in the United States, where the median P/S ratio is around 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Life Time Group Holdings

What Does Life Time Group Holdings' Recent Performance Look Like?

Recent times haven't been great for Life Time Group Holdings as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Is There Some Revenue Growth Forecasted For Life Time Group Holdings?

Life Time Group Holdings' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. Pleasingly, revenue has also lifted 125% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 13% as estimated by the nine analysts watching the company. With the industry predicted to deliver 19% growth, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Life Time Group Holdings' P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Life Time Group Holdings' P/S?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

When you consider that Life Time Group Holdings' 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. A positive change is needed in order to justify the current price-to-sales ratio.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Life Time Group Holdings (1 is significant!) that you should be aware of before investing here.

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.