Ai-Media Technologies Limited's (ASX:AIM) Shares Leap 32% Yet They're Still Not Telling The Full Story

Ai-Media Technologies Limited (ASX:AIM) shareholders have had their patience rewarded with a 32% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 67%.

Although its price has surged higher, it's still not a stretch to say that Ai-Media Technologies' price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Commercial Services industry in Australia, where the median P/S ratio is around 1.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Ai-Media Technologies

How Has Ai-Media Technologies Performed Recently?

Ai-Media Technologies 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.

Want the full picture on analyst estimates for the company? Then our free report on Ai-Media Technologies will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Ai-Media Technologies?

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

Retrospectively, the last year delivered a decent 6.7% gain to the company's revenues. The latest three year period has also seen an excellent 76% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 8.4% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 4.1%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Ai-Media Technologies' P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Its shares have lifted substantially and now Ai-Media Technologies' P/S is back within range of the industry median. 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 Ai-Media Technologies currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You always need to take note of risks, for example - Ai-Media Technologies has 1 warning sign we think you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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.

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