LiveOne, Inc.'s (NASDAQ:LVO) Business And Shares Still Trailing The Industry

With a price-to-sales (or "P/S") ratio of 0.6x LiveOne, Inc. (NASDAQ:LVO) may be sending bullish signals at the moment, given that almost half of all the Entertainment companies in the United States have P/S ratios greater than 1.8x and even P/S higher than 6x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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View our latest analysis for LiveOne

What Does LiveOne's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, LiveOne's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think LiveOne'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 LiveOne's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue growth is heading into negative territory, declining 6.5% over the next year. With the industry predicted to deliver 21% growth, that's a disappointing outcome.

In light of this, it's understandable that LiveOne's P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From LiveOne's P/S?

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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that LiveOne's P/S is on the lower end of the spectrum. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 4 warning signs for LiveOne (of which 1 shouldn't be ignored!) you should know about.

If these risks are making you reconsider your opinion on LiveOne, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.