Yahoo Finance Investor Optimism Abounds Live Nation Entertainment, Inc. (NYSE:LYV) But Growth Is Lacking
There wouldn't be many who think Live Nation Entertainment, Inc.'s (NYSE:LYV) price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S for the Entertainment industry in the United States is similar at about 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
See our latest analysis for Live Nation Entertainment
What Does Live Nation Entertainment's Recent Performance Look Like?
With revenue growth that's superior to most other companies of late, Live Nation Entertainment has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Live Nation Entertainment.
Do Revenue Forecasts Match The P/S Ratio?
Live Nation Entertainment's 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.
Taking a look back first, we see that the company grew revenue by an impressive 166% last year. The strong recent performance means it was also able to grow revenue by 44% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 8.1% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 10% each year, which is noticeably more attractive.
With this in mind, we find it intriguing that Live Nation Entertainment's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. 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 Does Live Nation Entertainment's P/S Mean For Investors?
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.
Given that Live Nation Entertainment's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.
There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Live Nation Entertainment that you should be aware of.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
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