Ascential plc's (LON:ASCL) Share Price Matching Investor Opinion

When you see that almost half of the companies in the Media industry in the United Kingdom have price-to-sales ratios (or "P/S") below 0.9x, Ascential plc (LON:ASCL) looks to be giving off strong sell signals with its 6.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Ascential

What Does Ascential's Recent Performance Look Like?

Ascential hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ascential.

How Is Ascential's Revenue Growth Trending?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 61%. As a result, revenue from three years ago have also fallen 10% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 201% over the next year. With the industry only predicted to deliver 8.3%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Ascential's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

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 Ascential's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 2 warning signs we've spotted with Ascential (including 1 which is a bit unpleasant).

If you're unsure about the strength of Ascential'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.