With a median price-to-sales (or "P/S") ratio of close to 1.3x in the Entertainment industry in the United States, you could be forgiven for feeling indifferent about Bilibili Inc.'s (NASDAQ:BILI) P/S ratio of 1.7x.  However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.    

NasdaqGS:BILI Price to Sales Ratio vs Industry April 25th 2024

How Bilibili Has Been Performing

Bilibili could be doing better as it's been growing revenue less than most other companies lately.   One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around.  If not, then existing shareholders may be a little nervous about the viability of the share price.    

Keen to find out how analysts think Bilibili's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Bilibili's Revenue Growth Trending?  

There's an inherent assumption that a company should be matching the industry for P/S ratios like Bilibili's to be considered reasonable.  

Retrospectively, the last year delivered a decent 2.9% gain to the company's revenues.   This was backed up an excellent period prior to see revenue up by 88% in total over the last three years.  Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.  

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 12% per annum over the next three years.  Meanwhile, the rest of the industry is forecast to only expand by 9.7% each year, which is noticeably less attractive.

In light of this, it's curious that Bilibili's P/S sits in line with the majority of other companies.  Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.  

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Looking at Bilibili's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected.  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.  However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.    

The company's balance sheet is another key area for risk analysis.  You can assess many of the main risks through our free balance sheet analysis for Bilibili with six simple checks.  

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.