QYOU Media Inc. (CVE:QYOU) Soars 29% But It's A Story Of Risk Vs Reward

The QYOU Media Inc. (CVE:QYOU) share price has done very well over the last month, posting an excellent gain of 29%. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, it's still not a stretch to say that QYOU Media's price-to-sales (or "P/S") ratio of 0.8x right now seems quite "middle-of-the-road" compared to the Media industry in Canada, where the median P/S ratio is around 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Our free stock report includes 3 warning signs investors should be aware of before investing in QYOU Media. Read for free now.

View our latest analysis for QYOU Media

How Has QYOU Media Performed Recently?

For example, consider that QYOU Media's financial performance has been pretty ordinary lately as revenue growth is non-existent. It might be that many expect the uninspiring revenue performance to only match most other companies at best over the coming period, which has kept the P/S from rising. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

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.

How Is QYOU Media's Revenue Growth Trending?

QYOU Media's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. However, a few strong years before that means that it was still able to grow revenue by an impressive 249% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

This is in contrast to the rest of the industry, which is expected to grow by 1.0% 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 Bottom Line On QYOU Media's P/S

QYOU Media appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

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. 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. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for QYOU Media (2 shouldn't be ignored) you should be aware of.

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.