Emerald Holding, Inc.'s (NYSE:EEX) Popularity With Investors Is Clear

When close to half the companies in the Media industry in the United States have price-to-sales ratios (or "P/S") below 1x, you may consider Emerald Holding, Inc. (NYSE:EEX) as a stock to potentially avoid with its 2.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Emerald Holding

What Does Emerald Holding's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Emerald Holding has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Emerald Holding's Revenue Growth Trending?

In order to justify its P/S ratio, Emerald Holding would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were fairly tame in comparison. 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 9.9% as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 4.6% growth forecast for the broader industry.

With this information, we can see why Emerald Holding is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

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.

As we suspected, our examination of Emerald Holding's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Emerald Holding you should be aware of, and 1 of them shouldn't be ignored.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.