trivago N.V. (NASDAQ:TRVG) shares have continued their recent momentum with a 28% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 12% is also fairly reasonable.

Even after such a large jump in price, when close to half the companies operating in the United States' Interactive Media and Services industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider trivago as an enticing stock to check out with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for trivago

How trivago Has Been Performing

trivago could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is trivago's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as trivago's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.1%. Even so, admirably revenue has lifted 50% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 6.1% per year during the coming three years according to the eight analysts following the company. With the industry predicted to deliver 12% growth per year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why trivago's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Despite trivago's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that trivago maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for trivago with six simple checks on some of these key factors.

If you're unsure about the strength of trivago'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.