Gaia, Inc. (NASDAQ:GAIA) Doing What It Can To Lift Shares

With a median price-to-sales (or "P/S") ratio of close to 1.3x in the Entertainment industry in the United States, you could be forgiven for feeling indifferent about Gaia, Inc.'s (NASDAQ:GAIA) P/S ratio of 1.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Gaia

How Has Gaia Performed Recently?

With revenue growth that's inferior to most other companies of late, Gaia has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Gaia's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 9.3%. Revenue has also lifted 12% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 15% over the next year. With the industry only predicted to deliver 12%, the company is positioned for a stronger revenue result.

In light of this, it's curious that Gaia's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does Gaia's P/S Mean For Investors?

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.

We've established that Gaia currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 1 warning sign for Gaia that you need to take into consideration.

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.