Many Still Looking Away From QYOU Media Inc. (CVE:QYOU)

Explore QYOU Media's Fair Values from the Community and select yours

There wouldn't be many who think QYOU Media Inc.'s (CVE:QYOU) price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S for the Media industry in Canada is very similar. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for QYOU Media

What Does QYOU Media's Recent Performance Look Like?

Revenue has risen firmly for QYOU Media recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on QYOU Media will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on QYOU Media's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For QYOU Media?

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

Retrospectively, the last year delivered a decent 14% gain to the company's revenues. Pleasingly, revenue has also lifted 69% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

This is in contrast to the rest of the industry, which is expected to grow by 2.4% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we find it interesting that QYOU Media is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Key Takeaway

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.

To our surprise, QYOU Media revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

It is also worth noting that we have found 4 warning signs for QYOU Media (3 are concerning!) that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.