With a price-to-sales (or "P/S") ratio of 0.3x Sinclair, Inc. (NASDAQ:SBGI) may be sending bullish signals at the moment, given that almost half of all the Media companies in the United States have P/S ratios greater than 1x and even P/S higher than 3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Sinclair Has Been Performing

Sinclair could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Is There Any Revenue Growth Forecasted For Sinclair?

Sinclair's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 20% 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 47% 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 eight analysts covering the company suggest revenue should grow by 3.6% per annum over the next three years. With the industry predicted to deliver 4.5% growth per annum, the company is positioned for a comparable revenue result.

With this information, we find it odd that Sinclair is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Key Takeaway

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It looks to us like the P/S figures for Sinclair remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

You need to take note of risks, for example - Sinclair has 3 warning signs (and 1 which can't be ignored) we think you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.