With a price-to-sales (or "P/S") ratio of 0.3x Liberty Latin America Ltd. (NASDAQ:LILA) may be sending bullish signals at the moment, given that almost half of all the Telecom companies in the United States have P/S ratios greater than 1.1x and even P/S higher than 4x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Liberty Latin America

What Does Liberty Latin America's Recent Performance Look Like?

Liberty Latin America hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Liberty Latin America's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Liberty Latin America's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.5%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 24% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 3.5% over the next year. With the industry predicted to deliver 1.6% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Liberty Latin America is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Liberty Latin America's P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've seen that Liberty Latin America currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 4 warning signs for Liberty Latin America that you need to take into consideration.

If you're unsure about the strength of Liberty Latin America'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.