Take Care Before Jumping Onto MediaCo Holding Inc. (NASDAQ:MDIA) Even Though It's 25% Cheaper

MediaCo Holding Inc. (NASDAQ:MDIA) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 18% in that time.

Although its price has dipped substantially, it's still not a stretch to say that MediaCo Holding's price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" compared to the Media industry in the United States, where the median P/S ratio is around 1.1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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Check out our latest analysis for MediaCo Holding

What Does MediaCo Holding's Recent Performance Look Like?

Recent times have been quite advantageous for MediaCo Holding as its revenue has been rising very briskly. The P/S is probably moderate because investors think this strong revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on MediaCo Holding will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 growth that's similar to the industry.

Retrospectively, the last year delivered an exceptional 166% gain to the company's top line. The latest three year period has also seen an excellent 219% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 3.0% shows it's noticeably more attractive.

With this information, we find it interesting that MediaCo Holding is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does MediaCo Holding's P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for MediaCo Holding looks to be in line with the rest of the Media industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

To our surprise, MediaCo Holding revealed its three-year revenue trends aren't contributing to its P/S as much as we would have predicted, given they look better than current industry expectations. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for MediaCo Holding (3 are a bit unpleasant) you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.