There's Reason For Concern Over fuboTV Inc.'s (NYSE:FUBO) Massive 26% Price Jump
fuboTV Inc. (NYSE:FUBO) shares have surged 26% in the last month and 181% over the past year. Despite this, its price-to-sales (P/S) ratio of 0.9x is below the industry median of 1.4x, raising concerns about its revenue growth, which has lagged behind competitors. Analysts predict a 1% revenue decline next year, contrasting with the industry's expected 15% growth. This suggests that the current P/S may not be justified, as declining revenues could impact future stock performance. Investors should be aware of potential risks associated with fuboTV's outlook.
fuboTV Inc. (NYSE:FUBO) shares have continued their recent momentum with a 26% gain in the last month alone. The last month tops off a massive increase of 181% in the last year.
Even after such a large jump in price, there still wouldn't be many who think fuboTV's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in the United States' Interactive Media and Services industry is similar at about 1.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.
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See our latest analysis for fuboTV
How Has fuboTV Performed Recently?
Recent times haven't been great for fuboTV as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on fuboTV.
Do Revenue Forecasts Match The P/S Ratio?
In order to justify its P/S ratio, fuboTV would need to produce growth that's similar to the industry.
Retrospectively, the last year delivered a decent 6.6% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 91% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 1.0% as estimated by the seven analysts watching the company. That's not great when the rest of the industry is expected to grow by 15%.
With this in consideration, we think it doesn't make sense that fuboTV's P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.
The Bottom Line On fuboTV's P/S
fuboTV'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.
Our check of fuboTV's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. 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.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with fuboTV (at least 1 which is a bit concerning), and understanding them should be part of your investment process.
If these risks are making you reconsider your opinion on fuboTV, explore our interactive list of high quality stocks to get an idea of what else is out there.
