Wynn Resorts, Limited's (NASDAQ:WYNN) price-to-sales (or "P/S") ratio of 1.9x may not look like an appealing 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.   Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.  

Check out our latest analysis for Wynn Resorts

NasdaqGS:WYNN Price to Sales Ratio vs Industry January 25th 2024

How Has Wynn Resorts Performed Recently?

Wynn Resorts certainly has been doing a good job lately as it's been growing revenue more than most other companies.   It seems the market expects this form will continue into the future, hence the elevated P/S ratio.  You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.    

Keen to find out how analysts think Wynn Resorts' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?  

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

If we review the last year of revenue growth, the company posted a terrific increase of 50%.   The strong recent performance means it was also able to grow revenue by 86% in total over the last three years.  Therefore, it's fair to say the revenue growth recently has been superb for the company.  

Looking ahead now, revenue is anticipated to climb by 12% per annum during the coming three years according to the analysts following the company.  That's shaping up to be similar to the 13% per year growth forecast for the broader industry.

With this information, we find it interesting that Wynn Resorts is trading at a high P/S compared to the industry.  It seems most investors are ignoring the fairly average growth expectations and are willing to pay up for exposure to the stock.  Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.  

The Bottom Line On Wynn Resorts' 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.

Seeing as its revenues are forecast to grow in line with the wider industry, it would appear that Wynn Resorts currently trades on a higher than expected P/S.  Right now we are uncomfortable with the relatively high share price as the predicted future revenues aren't likely to support such positive sentiment for long.  A positive change is needed in order to justify the current price-to-sales ratio.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for Wynn Resorts (2 make us uncomfortable!) that you need to be mindful of.  

If you're unsure about the strength of Wynn Resorts' 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.