Boston Omaha Corporation's (NYSE:BOC) Price In Tune With Revenues
When close to half the companies in the Media industry in the United States have price-to-sales ratios (or "P/S") below 0.9x, you may consider Boston Omaha Corporation (NYSE:BOC) as a stock to avoid entirely with its 7.1x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for Boston Omaha
What Does Boston Omaha's P/S Mean For Shareholders?
Recent times have been advantageous for Boston Omaha as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
Want the full picture on analyst estimates for the company? Then our free report on Boston Omaha will help you uncover what's on the horizon.
Is There Enough Revenue Growth Forecasted For Boston Omaha?
The only time you'd be truly comfortable seeing a P/S as steep as Boston Omaha's is when the company's growth is on track to outshine the industry decidedly.
Taking a look back first, we see that the company grew revenue by an impressive 46% last year. The strong recent performance means it was also able to grow revenue by 101% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 8.8% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 3.2% growth forecast for the broader industry.
In light of this, it's understandable that Boston Omaha's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
The Key Takeaway
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 Boston Omaha maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Media industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
Before you take the next step, you should know about the 1 warning sign for Boston Omaha that we have uncovered.
If you're unsure about the strength of Boston Omaha's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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