MediaAlpha, Inc. (NYSE:MAX) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.4% over the last year.

In spite of the firm bounce in price, it's still not a stretch to say that MediaAlpha's price-to-sales (or "P/S") ratio of 1.2x right now seems quite "middle-of-the-road" compared to the Interactive Media and Services industry in the United States, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for MediaAlpha

How Has MediaAlpha Performed Recently?

MediaAlpha 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. If not, then existing shareholders may be a little nervous about the viability of the share price.

What Are Revenue Growth Metrics Telling Us About The P/S?

MediaAlpha'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 27% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 15% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 18% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 12% each year, which is noticeably less attractive.

In light of this, it's curious that MediaAlpha's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On MediaAlpha's P/S

MediaAlpha's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Despite enticing revenue growth figures that outpace the industry, MediaAlpha's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You need to take note of risks, for example - MediaAlpha has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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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