Alter Ego Media S.A.'s (ATH:AEM) Price In Tune With Revenues

When close to half the companies in the Media industry in Greece have price-to-sales ratios (or "P/S") below 0.7x, you may consider Alter Ego Media S.A. (ATH:AEM) as a stock to potentially avoid with its 2.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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View our latest analysis for Alter Ego Media

What Does Alter Ego Media's Recent Performance Look Like?

Recent times haven't been great for Alter Ego Media as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. If not, then existing shareholders may be very nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Alter Ego Media?

The only time you'd be truly comfortable seeing a P/S as high as Alter Ego Media's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. This was backed up an excellent period prior to see revenue up by 58% 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.

Looking ahead now, revenue is anticipated to remain buoyant, climbing by 10.0% during the coming year according to the one analyst following the company. Meanwhile, the broader industry is forecast to contract by 2.4%, which would indicate the company is doing very well.

With this in consideration, we understand why Alter Ego Media's P/S is a cut above its industry peers. At this time, shareholders aren't keen to offload something that is potentially eyeing a much more prosperous future.

The Bottom Line On Alter Ego Media's P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Alter Ego Media's analyst forecasts revealed that its superior revenue outlook against a shaky industry 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. Questions could still raised over whether this level of outperformance can continue in the context of a a tumultuous industry climate. Otherwise, it's hard to see the share price falling strongly in the near future under the current growth expectations.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Alter Ego Media with six simple checks on some of these key factors.

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.