Three's Company Media Group Co., Ltd.'s (SHSE:605168) Share Price Boosted 30% But Its Business Prospects Need A Lift Too

Three's Company Media Group Co., Ltd. (SHSE:605168) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 37% over that time.

Even after such a large jump in price, Three's Company Media Group may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.3x, since almost half of all companies in the Media industry in China have P/S ratios greater than 2.3x and even P/S higher than 6x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Three's Company Media Group

What Does Three's Company Media Group's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Three's Company Media Group's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on Three's Company Media Group will help you uncover what's on the horizon.

How Is Three's Company Media Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Three's Company Media Group's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 14%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 63% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 1.5% over the next year. With the industry predicted to deliver 13% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Three's Company Media Group's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Three's Company Media Group's P/S?

Despite Three's Company Media Group's share price climbing recently, its P/S still lags most other companies. 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 Three's Company Media Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 3 warning signs for Three's Company Media Group that you need to take into consideration.

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.