Investors Still Aren't Entirely Convinced By Clear Channel Outdoor Holdings, Inc.'s (NYSE:CCO) Revenues Despite 28% Price Jump

Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 12% in the last twelve months.

In spite of the firm bounce in price, Clear Channel Outdoor Holdings' price-to-sales (or "P/S") ratio of 0.4x might still make it look like a buy right now compared to the Media industry in the United States, where around half of the companies have P/S ratios above 1.1x and even P/S above 4x are quite common. 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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See our latest analysis for Clear Channel Outdoor Holdings

How Clear Channel Outdoor Holdings Has Been Performing

With revenue growth that's superior to most other companies of late, Clear Channel Outdoor Holdings has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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Is There Any Revenue Growth Forecasted For Clear Channel Outdoor Holdings?

Clear Channel Outdoor Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 33% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 3.8% each year as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 3.1% per year, which is not materially different.

In light of this, it's peculiar that Clear Channel Outdoor Holdings' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On Clear Channel Outdoor Holdings' P/S

Clear Channel Outdoor Holdings' stock price has surged recently, but its but its P/S still remains modest. 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.

We've seen that Clear Channel Outdoor Holdings currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Clear Channel Outdoor Holdings (at least 2 which don't sit too well with us), and understanding these should be part of your investment process.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.