Gaia, Inc.'s (NASDAQ:GAIA) P/S Is Still On The Mark Following 32% Share Price Bounce

Gaia, Inc. (NASDAQ:GAIA) shareholders would be excited to see that the share price has had a great month, posting a 32% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 96%.

Although its price has surged higher, it's still not a stretch to say that Gaia's price-to-sales (or "P/S") ratio of 1.6x right now seems quite "middle-of-the-road" compared to the Entertainment industry in the United States, where the median P/S ratio is around 1.4x. 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 Gaia

How Has Gaia Performed Recently?

Recent times haven't been great for Gaia as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Gaia.

What Are Revenue Growth Metrics Telling Us About The P/S?

Gaia's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 9.3% gain to the company's revenues. The latest three year period has also seen a 12% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 15% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 13%, which is not materially different.

With this in mind, it makes sense that Gaia's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Gaia's P/S

Its shares have lifted substantially and now Gaia's P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look at Gaia'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. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Gaia that you should be aware of.

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.