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华尔街日报There's Reason For Concern Over Snipp Interactive Inc.'s (CVE:SPN) Price
With a median price-to-sales (or "P/S") ratio of close to 0.7x in the Media industry in Canada, you could be forgiven for feeling indifferent about Snipp Interactive Inc.'s (CVE:SPN) P/S ratio of 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
View our latest analysis for Snipp Interactive
What Does Snipp Interactive's P/S Mean For Shareholders?
While the industry has experienced revenue growth lately, Snipp Interactive's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Snipp Interactive will help you uncover what's on the horizon.How Is Snipp Interactive's Revenue Growth Trending?
In order to justify its P/S ratio, Snipp Interactive would need to produce growth that's similar to the industry.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.4%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 13% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.
Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 7.4% as estimated by the one analyst watching the company. Meanwhile, the broader industry is forecast to expand by 5.1%, which paints a poor picture.
In light of this, it's somewhat alarming that Snipp Interactive's P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.
What Does Snipp Interactive's P/S Mean For Investors?
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.
Our check of Snipp Interactive's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.
Plus, you should also learn about these 2 warning signs we've spotted with Snipp Interactive (including 1 which makes us a bit uncomfortable).
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.