Xponential Fitness, Inc. (NYSE:XPOF) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 52% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Xponential Fitness' price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in the United States' Hospitality industry is similar at about 1.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does Xponential Fitness' Recent Performance Look Like?

Xponential Fitness could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Xponential Fitness' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Xponential Fitness' is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. Pleasingly, revenue has also lifted 199% 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.

Turning to the outlook, the next three years should generate growth of 9.4% per annum as estimated by the analysts watching the company. With the industry predicted to deliver 11% growth per annum, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Xponential Fitness' P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What We Can Learn From Xponential Fitness' P/S?

Xponential Fitness' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A Xponential Fitness' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Hospitality industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

It is also worth noting that we have found 5 warning signs for Xponential Fitness (2 are significant!) that you need to take into consideration.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.