Despite an already strong run, MediaCo Holding Inc. (NASDAQ:MDIA) shares have been powering on, with a gain of 45% in the last thirty days. This latest share price bounce rounds out a remarkable 776% gain over the last twelve months.

Following the firm bounce in price, given around half the companies in the United States' Media industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider MediaCo Holding as a stock to avoid entirely with its 7.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

How Has MediaCo Holding Performed Recently?

For example, consider that MediaCo Holding's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For MediaCo Holding?

The only time you'd be truly comfortable seeing a P/S as steep as MediaCo Holding's is when the company's growth is on track to outshine the industry decidedly.

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 16%. The last three years don't look nice either as the company has shrunk revenue by 15% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 4.3% shows it's an unpleasant look.

In light of this, it's alarming that MediaCo Holding's P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Bottom Line On MediaCo Holding's P/S

The strong share price surge has lead to MediaCo Holding's P/S soaring as well. 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.

We've established that MediaCo Holding currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. Right now we aren't comfortable with the high P/S as this revenue performance is highly unlikely to support such positive sentiment for long. Should recent medium-term revenue trends persist, it would pose a significant risk to existing shareholders' investments and prospective investors will have a hard time accepting the current value of the stock.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with MediaCo Holding, and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on MediaCo Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.