Boat Rocker Media Inc.'s (TSE:BRMI) 28% Price Boost Is Out Of Tune With Revenues

Those holding Boat Rocker Media Inc. (TSE:BRMI) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Boat Rocker Media's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Entertainment industry in Canada is also close to 0.5x. 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 Boat Rocker Media

How Has Boat Rocker Media Performed Recently?

Boat Rocker Media hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Boat Rocker Media?

Boat Rocker Media's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with 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 57%. As a result, revenue from three years ago have also fallen 42% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 1.2% during the coming year according to the three analysts following the company. With the industry predicted to deliver 13% growth, that's a disappointing outcome.

With this in consideration, we think it doesn't make sense that Boat Rocker Media's P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Key Takeaway

Boat Rocker Media appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It appears that Boat Rocker Media currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

It is also worth noting that we have found 1 warning sign for Boat Rocker Media that you need to take into consideration.

If you're unsure about the strength of Boat Rocker Media's 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.