Entertainment Network (India) Limited's (NSE:ENIL) P/S Still Appears To Be Reasonable

With a median price-to-sales (or "P/S") ratio of close to 2.1x in the Media industry in India, you could be forgiven for feeling indifferent about Entertainment Network (India) Limited's (NSE:ENIL) P/S ratio of 2.2x. 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.

View our latest analysis for Entertainment Network (India)

What Does Entertainment Network (India)'s P/S Mean For Shareholders?

Recent times haven't been great for Entertainment Network (India) as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Entertainment Network (India) will help you uncover what's on the horizon.

How Is Entertainment Network (India)'s Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Entertainment Network (India)'s to be considered reasonable.

Retrospectively, the last year delivered a decent 8.5% gain to the company's revenues. The latest three year period has also seen a 20% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 11% over the next year. Meanwhile, the rest of the industry is forecast to expand by 12%, which is not materially different.

With this in mind, it makes sense that Entertainment Network (India)'s P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Key Takeaway

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.

Our look at Entertainment Network (India)'s revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Entertainment Network (India) (at least 1 which is a bit unpleasant), and understanding these should be part of your investment process.

If these risks are making you reconsider your opinion on Entertainment Network (India), explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.