WildBrain Ltd.'s (TSE:WILD) Price In Tune With Revenues

There wouldn't be many who think WildBrain Ltd.'s (TSE:WILD) price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S for the Entertainment industry in Canada is similar at about 0.4x. 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 WildBrain

What Does WildBrain's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, WildBrain has been very sluggish. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. 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 WildBrain will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For WildBrain?

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

Retrospectively, the last year delivered a frustrating 8.7% decrease to the company's top line. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the six analysts following the company. With the industry predicted to deliver 12% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that WildBrain's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Bottom Line On WildBrain's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A WildBrain's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Entertainment industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

You always need to take note of risks, for example - WildBrain has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on WildBrain, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.