Allegiant Travel Company (NASDAQ:ALGT) shares have had a horrible month, losing 28% after a relatively good period beforehand. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

Although its price has dipped substantially, there still wouldn't be many who think Allegiant Travel's price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S in the United States' Airlines industry is similar at about 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Allegiant Travel

What Does Allegiant Travel's Recent Performance Look Like?

Allegiant Travel 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. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is Allegiant Travel's Revenue Growth Trending?

In order to justify its P/S ratio, Allegiant Travel would need to produce growth that's similar to the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Still, the latest three year period has seen an excellent 47% overall rise in revenue, in spite of its uninspiring short-term performance. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Looking ahead now, revenue is anticipated to climb by 11% per year during the coming three years according to the twelve analysts following the company. With the industry predicted to deliver 318% growth per annum, the company is positioned for a weaker revenue result.

With this in mind, we find it intriguing that Allegiant Travel's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Final Word

With its share price dropping off a cliff, the P/S for Allegiant Travel looks to be in line with the rest of the Airlines industry. 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.

Given that Allegiant Travel'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. A positive change is needed in order to justify the current price-to-sales ratio.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Allegiant Travel that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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