Stock Analysis

CuriosityStream Inc.'s (NASDAQ:CURI) Low P/S No Reason For Excitement

NasdaqCM:CURI
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CuriosityStream Inc.'s (NASDAQ:CURI) price-to-sales (or "P/S") ratio of 0.5x might make it look like a buy right now compared to the Entertainment industry in the United States, where around half of the companies have P/S ratios above 1.2x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for CuriosityStream

ps-multiple-vs-industry
NasdaqCM:CURI Price to Sales Ratio vs Industry January 26th 2024

How CuriosityStream Has Been Performing

While the industry has experienced revenue growth lately, CuriosityStream's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think CuriosityStream's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 38% decrease to the company's top line. Even so, admirably revenue has lifted 62% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 11% as estimated by the two analysts watching the company. That's shaping up to be materially lower than the 13% growth forecast for the broader industry.

In light of this, it's understandable that CuriosityStream's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From CuriosityStream'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 expected, our analysis of CuriosityStream's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

You should always think about risks. Case in point, we've spotted 2 warning signs for CuriosityStream you should be aware of.

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.