Alliance Entertainment Holding Corporation's (NASDAQ:AENT) Share Price Is Still Matching Investor Opinion Despite 25% Slump

To the annoyance of some shareholders, Alliance Entertainment Holding Corporation (NASDAQ:AENT) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Looking at the bigger picture, even after this poor month the stock is up 36% in the last year.

Although its price has dipped substantially, it's still not a stretch to say that Alliance Entertainment Holding's price-to-sales (or "P/S") ratio of 0.1x right now seems quite "middle-of-the-road" compared to the Retail Distributors industry in the United States, where the median P/S ratio is around 0.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Alliance Entertainment Holding

How Has Alliance Entertainment Holding Performed Recently?

Alliance Entertainment Holding could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Alliance Entertainment Holding would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.0%. The last three years don't look nice either as the company has shrunk revenue by 27% in aggregate. 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 climb by 2.1% during the coming year according to the sole analyst following the company. With the industry predicted to deliver 1.7% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Alliance Entertainment Holding's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Alliance Entertainment Holding's P/S?

Following Alliance Entertainment Holding's share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've seen that Alliance Entertainment Holding maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Alliance Entertainment Holding (including 2 which are a bit concerning).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.