Benign Growth For Lee Enterprises, Incorporated (NASDAQ:LEE) Underpins Its Share Price

Lee Enterprises, Incorporated's (NASDAQ:LEE) price-to-sales (or "P/S") ratio of 0.1x might make it look like a buy right now compared to the Media industry in the United States, where around half of the companies have P/S ratios above 1x 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.

Check out our latest analysis for Lee Enterprises

What Does Lee Enterprises' Recent Performance Look Like?

Lee Enterprises hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For Lee Enterprises?

In order to justify its P/S ratio, Lee Enterprises would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 14%. This means it has also seen a slide in revenue over the longer-term as revenue is down 18% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 2.1% during the coming year according to the lone analyst following the company. That's not great when the rest of the industry is expected to grow by 4.5%.

With this in consideration, we find it intriguing that Lee Enterprises' P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Final Word

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.

It's clear to see that Lee Enterprises maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. As other companies in the industry are forecasting revenue growth, Lee Enterprises' poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Plus, you should also learn about these 2 warning signs we've spotted with Lee Enterprises (including 1 which is a bit unpleasant).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com