Risks Still Elevated At These Prices As Boat Rocker Media Inc. (TSE:BRMI) Shares Dive 26%

Boat Rocker Media Inc. (TSE:BRMI) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 41% share price drop.

Although its price has dipped substantially, it's still not a stretch to say that Boat Rocker Media's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Entertainment industry in Canada, where the median P/S ratio is around 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Boat Rocker Media

What Does Boat Rocker Media's Recent Performance Look Like?

Boat Rocker Media 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. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Some Revenue Growth Forecasted For Boat Rocker Media?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 15% last year. Pleasingly, revenue has also lifted 126% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 27% during the coming year according to the four analysts following the company. Meanwhile, the broader industry is forecast to expand by 26%, which paints a poor picture.

In light of this, it's somewhat alarming that Boat Rocker Media's P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Key Takeaway

Following Boat Rocker Media's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

While Boat Rocker Media's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue 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 we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Before you settle on your opinion, we've discovered 2 warning signs for Boat Rocker Media 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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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.