Optimistic Investors Push MediaCo Holding Inc. (NASDAQ:MDIA) Shares Up 45% But Growth Is Lacking

MediaCo Holding Inc. (NASDAQ:MDIA) shares have continued their recent momentum with a 45% gain in the last month alone. This latest share price bounce rounds out a remarkable 776% gain over the last twelve months.

Following the firm bounce in price, when almost half of the companies in the United States' Media industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider MediaCo Holding as a stock not worth researching with its 7.4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for MediaCo Holding

How MediaCo Holding Has Been Performing

As an illustration, revenue has deteriorated at MediaCo Holding over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on MediaCo Holding will help you shine a light on its historical performance.

How Is MediaCo Holding's Revenue Growth Trending?

In order to justify its P/S ratio, MediaCo Holding would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a frustrating 16% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 15% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 4.3% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we find it concerning that MediaCo Holding is trading at a P/S higher than the industry. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Final Word

The strong share price surge has lead to MediaCo Holding's P/S soaring as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that MediaCo Holding currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

We don't want to rain on the parade too much, but we did also find 3 warning signs for MediaCo Holding that you need to be mindful of.

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

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

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.