Market Might Still Lack Some Conviction On QYOU Media Inc. (CVE:QYOU) Even After 50% Share Price Boost

The QYOU Media Inc. (CVE:QYOU) share price has done very well over the last month, posting an excellent gain of 50%. Looking back a bit further, it's encouraging to see the stock is up 29% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about QYOU Media's P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Media industry in Canada is also close to 0.6x. 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

How QYOU Media Has Been Performing

The revenue growth achieved at QYOU Media over the last year would be more than acceptable for most companies. 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?

There's an inherent assumption that a company should be matching the industry for P/S ratios like QYOU Media's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. This was backed up an excellent period prior to see revenue up by 32% in total over the last three years. 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 2.1% 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. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Key Takeaway

Its shares have lifted substantially and now QYOU Media's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that QYOU Media currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 4 warning signs for QYOU Media you should be aware of, and 2 of them are concerning.

If you're unsure about the strength of QYOU 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.