Gannett Co., Inc.'s (NYSE:GCI) Price Is Right But Growth Is Lacking

Gannett Co., Inc.'s (NYSE:GCI) price-to-sales (or "P/S") ratio of 0.1x might 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 1x and even P/S above 3x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Gannett

How Gannett Has Been Performing

Gannett could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Gannett.

How Is Gannett's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Gannett's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 9.6% decrease to the company's top line. As a result, revenue from three years ago have also fallen 22% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 1.3% per annum during the coming three years according to the three analysts following the company. Meanwhile, the broader industry is forecast to expand by 4.2% each year, which paints a poor picture.

With this in consideration, we find it intriguing that Gannett's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

The Key Takeaway

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.

It's clear to see that Gannett maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Gannett with six simple checks on some of these key factors.

If you're unsure about the strength of Gannett's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.