With a median price-to-sales (or "P/S") ratio of close to 0.9x in the Media industry in the United States, you could be forgiven for feeling indifferent about Thryv Holdings, Inc.'s (NASDAQ:THRY) P/S ratio of 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does Thryv Holdings' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Thryv Holdings' 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. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

How Is Thryv Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Thryv Holdings 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 9.0%. This means it has also seen a slide in revenue over the longer-term as revenue is down 22% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 9.0% during the coming year according to the six analysts following the company. That's not great when the rest of the industry is expected to grow by 4.0%.

In light of this, it's somewhat alarming that Thryv Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Bottom Line On Thryv Holdings' P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It appears that Thryv Holdings currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. 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 we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

You should always think about risks. Case in point, we've spotted 1 warning sign for Thryv Holdings you should be aware of.

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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