It's Down 27% But PodcastOne, Inc. (NASDAQ:PODC) Could Be Riskier Than It Looks

PodcastOne, Inc. (NASDAQ:PODC) shares have had a horrible month, losing 27% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 15% share price drop.

Even after such a large drop in price, it's still not a stretch to say that PodcastOne's price-to-sales (or "P/S") ratio of 0.9x 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 1.3x. 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 PodcastOne

What Does PodcastOne's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, PodcastOne has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Keen to find out how analysts think PodcastOne's future stacks up against the industry? In that case, our free report is a great place to start.

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

There's an inherent assumption that a company should be matching the industry for P/S ratios like PodcastOne's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 23% gain to the company's top line. Pleasingly, revenue has also lifted 54% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 17% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

With this in consideration, we find it intriguing that PodcastOne's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

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

PodcastOne's plummeting stock price has brought its P/S back to a similar region as the rest of the 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.

Despite enticing revenue growth figures that outpace the industry, PodcastOne's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 4 warning signs for PodcastOne (1 is significant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on PodcastOne, 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.