Eros International Media Limited (NSE:EROSMEDIA) Stock Rockets 26% But Many Are Still Ignoring The Company

Eros International Media Limited (NSE:EROSMEDIA) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

In spite of the firm bounce in price, Eros International Media's price-to-sales (or "P/S") ratio of 0.5x might still make it look like a strong buy right now compared to the wider Entertainment industry in India, where around half of the companies have P/S ratios above 6.6x and even P/S above 29x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

See our latest analysis for Eros International Media

How Eros International Media Has Been Performing

Recent times have been quite advantageous for Eros International Media as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Eros International Media will help you shine a light on its historical performance.

How Is Eros International Media's Revenue Growth Trending?

In order to justify its P/S ratio, Eros International Media would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 43% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 55% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 12%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it odd that Eros International Media is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Eros International Media's P/S Mean For Investors?

Even after such a strong price move, Eros International Media's P/S still trails the rest of the industry. 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.

Our examination of Eros International Media revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Having said that, be aware Eros International Media is showing 2 warning signs in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.