OverActive Media Corp.'s (CVE:OAM) 35% Jump Shows Its Popularity With Investors

Despite an already strong run, OverActive Media Corp. (CVE:OAM) shares have been powering on, with a gain of 35% in the last thirty days. The last 30 days bring the annual gain to a very sharp 93%.

Following the firm bounce in price, when almost half of the companies in Canada's Entertainment industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider OverActive Media as a stock probably not worth researching with its 1.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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See our latest analysis for OverActive Media

What Does OverActive Media's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, OverActive Media has been doing very well. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on OverActive Media will help you shine a light on its historical performance.

How Is OverActive Media's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as OverActive Media's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 47% gain to the company's top line. Pleasingly, revenue has also lifted 98% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 22% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's understandable that OverActive Media's P/S sits above the majority of other companies. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On OverActive Media's P/S

OverActive Media's P/S is on the rise since its shares have risen strongly. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of OverActive Media revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for OverActive 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.