Entravision Communications Corporation (NYSE:EVC) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 67% share price decline over the last year.

Although its price has surged higher, Entravision Communications may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Media industry in the United States have P/S ratios greater than 0.9x 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.

What Does Entravision Communications' Recent Performance Look Like?

Recent times have been advantageous for Entravision Communications as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Entravision Communications?

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

If we review the last year of revenue growth, the company posted a terrific increase of 16%. The strong recent performance means it was also able to grow revenue by 222% 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 sole analyst covering the company suggest revenue growth is heading into negative territory, declining 18% over the next year. With the industry predicted to deliver 4.1% growth, that's a disappointing outcome.

With this information, we are not surprised that Entravision Communications is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Entravision Communications' P/S?

The latest share price surge wasn't enough to lift Entravision Communications' P/S close to the industry median. 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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Entravision Communications' P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Entravision Communications' poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 4 warning signs we've spotted with Entravision Communications (including 1 which is concerning).

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.