There's No Escaping Warner Bros. Discovery, Inc.'s (NASDAQ:WBD) Muted Revenues Despite A 27% Share Price Rise

Despite an already strong run, Warner Bros. Discovery, Inc. (NASDAQ:WBD) shares have been powering on, with a gain of 27% in the last thirty days. The last month tops off a massive increase of 147% in the last year.

Although its price has surged higher, Warner Bros. Discovery may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.5x, since almost half of all companies in the Entertainment industry in the United States have P/S ratios greater than 2x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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Check out our latest analysis for Warner Bros. Discovery

How Has Warner Bros. Discovery Performed Recently?

Warner Bros. Discovery could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.

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Is There Any Revenue Growth Forecasted For Warner Bros. Discovery?

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

Retrospectively, the last year delivered a frustrating 4.3% decrease to the company's top line. Even so, admirably revenue has lifted 46% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 1.1% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 13% each year, which is noticeably more attractive.

With this in consideration, its clear as to why Warner Bros. Discovery's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Warner Bros. Discovery's P/S?

The latest share price surge wasn't enough to lift Warner Bros. Discovery's P/S close to the industry median. 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.

We've established that Warner Bros. Discovery maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Warner Bros. Discovery is showing 4 warning signs in our investment analysis, and 2 of those don't sit too well with us.

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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.