LiveOne, Inc. (NASDAQ:LVO) Soars 44% But It's A Story Of Risk Vs Reward
Despite an already strong run, LiveOne, Inc. (NASDAQ:LVO) shares have been powering on, with a gain of 44% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 82% in the last year.
In spite of the firm bounce in price, it's still not a stretch to say that LiveOne's price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" compared to the Entertainment industry in the United States, where the median P/S ratio is around 1.4x. 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.
Check out our latest analysis for LiveOne
How Has LiveOne Performed Recently?
LiveOne could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. 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 LiveOne will help you uncover what's on the horizon.
How Is LiveOne's Revenue Growth Trending?
LiveOne's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered a frustrating 15% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 157% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 16% over the next year. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.
With this information, we find it interesting that LiveOne is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.
What We Can Learn From LiveOne's P/S?
LiveOne appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.
Despite enticing revenue growth figures that outpace the industry, LiveOne's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
You need to take note of risks, for example - LiveOne has 4 warning signs (and 2 which can't be ignored) we think you should know about.
If you're unsure about the strength of LiveOne'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.
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