There wouldn't be many who think Despegar.com, Corp.'s (NYSE:DESP) price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S for the Hospitality industry in the United States is similar at about 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Despegar.com

How Has Despegar.com Performed Recently?

Despegar.com could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Despegar.com.

How Is Despegar.com's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Despegar.com's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. Pleasingly, revenue has also lifted 190% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the five analysts watching the company. With the industry predicted to deliver 13% growth per year, the company is positioned for a comparable revenue result.

With this in mind, it makes sense that Despegar.com's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Despegar.com's P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A Despegar.com's 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.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Despegar.com with six simple checks.

If you're unsure about the strength of Despegar.com's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.