NorthStar Gaming Holdings Inc. (CVE:BET) Looks Inexpensive But Perhaps Not Attractive Enough

NorthStar Gaming Holdings Inc.'s (CVE:BET) price-to-sales (or "P/S") ratio of 0.5x might make it look like a buy right now compared to the Hospitality industry in Canada, where around half of the companies have P/S ratios above 2.1x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

We've discovered 3 warning signs about NorthStar Gaming Holdings. View them for free.

See our latest analysis for NorthStar Gaming Holdings

How NorthStar Gaming Holdings Has Been Performing

NorthStar Gaming Holdings certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on NorthStar Gaming Holdings will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, NorthStar Gaming Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 65% gain to the company's top line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 204% shows it's noticeably less attractive.

In light of this, it's understandable that NorthStar Gaming Holdings' P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of NorthStar Gaming Holdings revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 3 warning signs for NorthStar Gaming Holdings that we have uncovered.

If you're unsure about the strength of NorthStar Gaming Holdings' 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.